Pound Pushes Higher
Although this morning’s UK reports weren’t that encouraging, the Pound to US Dollar (GBP/USD) Exchange Rate managed to edge higher during the North American session.
Yesterday the ‘Greenback’ was modestly supported by the news that US Consumer Credit jumped as lending for auto purchases increased. Consumer Credit advanced by 19.6 billion US Dollars in May.
According to financial economist Chris Rupkey; ‘This says a lot about the confidence of consumers and bodes well in terms of future spending. Their ability to take on more debt because of the firmer job market means this economy has some staying power.’
The Pound to US Dollar exchange rate was also trending at a slightly lower level after the US JOLTs Job Openings report showed the highest increase in job openings for nearly seven-years. This measure of the labour market is favoured by the Fed chief and prompted this response from economic analyst Terry Sheehan; ‘It’s a pretty stable job market that’s improving incrementally. It’s good for the Fed’.
The pairing was trading in the region of 1.7140 as investors speculated on the likelihood of the Federal Open Market Committee meeting minutes being dovish in tone.
As they were taken before the publication of impressive US ADP Employment Change and US Non-Farm payrolls figures, the minutes are likely to contain a reiteration of Fed Chairwoman Janet Yellen’s previous insistence that interest rates will remain on hold for the foreseeable future.
Today’s US MBA Mortgage Approvals figures had little impact on the Pound to US Dollar (GBP/USD) exchange rate. The EUR/USD exchange rate was trending in a slightly higher position amid an absence of influential economic news from the Eurozone.
Pound Could Climb
If the minutes do imply that the Fed’s approach to interest rates isn’t likely to change the Pound could advance on the US Dollar, potentially approaching fresh over five-year highs.
Sterling also received some support on Wednesday as a Bank of England official waxed lyrical on the subject of the UK’s impressive economic performance.
BoE Deputy Governor-designate Nemat Shafik asserted that the rate at which the UK economy is recovering is striking. As well as stating that; ‘We’ve seen that both output and employment have improved far better than we had expected. And spare capacity in firms seems to have closed’, Shafik commented; ‘The key things to look at are what’s happening to inflation [and] what’s happened to wages and what’s happened to unemployment and other indicators of the labour market. Wage growth has been flat, as have prices, and that’s the paradox of this recovery’.
The Bank of England is expected to leave interest rates on hold tomorrow, but if any of the nine members of the Monetary Policy Committee issue comments following the meeting Pound volatility could occur.
UK Trade Balance figures could also impact the Pound to US Dollar (GBP/USD) exchange rate tomorrow, as could US initial jobless claims figures.
UPDATED 21:55 GMT 09 July, 2014
Fed Minutes Cause Movement in Pound to US Dollar Exchange Rate
After the publication of minutes from the recent Federal Open Market Committee meeting, the Pound to US Dollar exchange rate advanced.
The EUR/USD pairing was also trending in a slightly stronger position.
The ‘Greenback’ fluctuated against several of its other major currency counterparts after the minutes were issued.
According to the report, some of the Federal Reserve’s policy makers are worried that investors are beginning to adopt a complacent attitude when it comes to the performance of the US economy and that such a stance could be detrimental to its long-term outlook.
Growth projections were lowered and the Fed indicated that it would be keeping an eye out for any risk-taking behavior.
Both the Pound to US Dollar (GBP/USD) and EUR/USD exchange rates are likely to hold gains overnight.
UPDATED: 10:05 GMT 10 July 2014
Effect of Minutes Wears off, Pound to US Dollar Slips
While the Pound to US Dollar (GBP/USD) exchange rate was initially trending in a stronger position following the release of minutes from the June FOMC gathering, the minutes fairly tepid content – coupled with the fact that the UK’s trade deficit widened in May – later saw the GBP/USD pairing give up earlier gains.
The UK’s trade deficit increased to a four-month high.
This was just the latest in a string of below-forecast UK fundamentals and supports the Bank of England’s decision to maintain historically low interest rates.
The EUR/USD pairing was holding steady during the European session. The Euro barely fluttered following the publication of the European Central Bank’s monthly report, but some movement in the Euro to US Dollar exchange rate could be generated by today’s US unemployment claims reports.
US Dollar (USD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
US Dollar,
,Pound Sterling,0.5835,
US Dollar,,Canadian Dollar,1.0665,
US Dollar,,Euro,0.7333,
US Dollar,,Australian Dollar,1.0632,
US Dollar,,New Zealand Dollar,1.1351,
Canadian Dollar,,US Dollar ,0.9387,
Pound Sterling,,US Dollar,1.7093,
Euro,,US Dollar,1.3594,
Australian Dollar,,US Dollar,0.9400,
New Zealand Dollar,,US Dollar,0.8796,
[/table]
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