On Wednesday the Pound to US Dollar (GBP/USD) exchange rate recouped recent declines, pushing briefly above 1.70, as investors reacted to an onslaught of disappointing US news.
Recently the Federal Open Market Committee indicated that it wouldn’t be raising interest rates for some time to come as accommodative policy was necessary given the level of slack in the US economy.
Today’s US data releases support this argument and sent the US Dollar spiralling lower against several of its major currency counterparts.
The ‘Greenback’ fell to against the Yen and Euro, and the Pound to US Dollar (GBP/USD) exchange rate reversed previous declines after less-than-impressive US growth and Durable Goods Orders report intimated that the US economic recovery is faltering.
The unexpectedly severe winter weather took a heavy toll on the US economy in the first quarter, with contraction of 1.0% recorded for the first three months of the year. It had been expected that this figure would be negatively revised to -1.8% but the adverse impact of the storms had an even greater impact.
Today’s figures showed that the US economy contracted at an annualised rate of 2.9% in the first quarter of 2014 – the most extreme pace of quarterly contraction for five years.
Although this result was shocking, and did have a knock on effect on the US Dollar, economists are expecting that the world’s largest economy enjoyed a rebound in the second quarter.
In the opinion of economist Stuart Hoffman; ‘We have ample evidence that the first quarter was just a temporary setback for the economy, and we are climbing out of the hole in the current quarter.’
The GBP to USD exchange rate pushed to a high of 1.7004 after the reports were released.
Meanwhile, US Durable Goods Orders unexpectedly fell by -0.1% in May rather than stagnating as expected. This followed a 0.8% increase in April.
Separate figures showed that US personal consumption rose by just 1.0% in the first quarter, down from 3.1% in the fourth quarter of last year and less than half the 2.4% estimated.
However, while the US Dollar (USD) exchange rate was lower against the Pound (GBP) and Euro (EUR), declines were slightly tempered as a separate report showed that the US Services PMI jumped from 58.1 to 61.2 in June, pushing further away from the 50 mark separating growth from contraction.
Further Pound to US Dollar (GBP/USD) exchange rate movement could occur tomorrow as UK house price figures and US personal spending data are published.
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,0.5884,
US Dollar,,Canadian Dollar,1.0722,
US Dollar,,Euro,0.7333,
US Dollar,,Australian Dollar,1.0659,
US Dollar,,New Zealand Dollar,1.1537,
Canadian Dollar,,US Dollar ,0.9206,
Pound Sterling,,US Dollar,1.6995,
Euro,,US Dollar,1.3638,
Australian Dollar,,US Dollar,0.9384,
New Zealand Dollar,,US Dollar,0.8721,
[/table]
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