Pound to USD Dollar (GBP/USD) Exchange Rate Restrained as Dovish FOMC Weighs

The Pound was little moved against the US Dollar on Monday to hold close to a five and a half year high despite the release of data which showed that US existing home sales and manufacturing output climbed to multi-month highs.

According to the data released by the National Association of Realtors, existing home sales in the world’s largest economy rose by 4.9%, the biggest increase recorded since October last year.

Economists had been forecasting for a rise of 4.74%.

The data suggests that the USA’s housing market is finally shrugging off the ill effects caused by the harsh weather seen in the winter.

A separate report also showed that manufacturing in the USA expanded at its strongest pace in four years as output, new orders and job creation all surged in June.

According to Markit its manufacturing Purchasing Managers Index (PMI) increased to 57.5 this month, beating expectations for a figure of 56.5 and was the highest reading seen since May 2010.

The previous months figure came in 56.4.

The PMI’s sub index for output climbed to 61 in June, up from the prior month’s figure of 59.6 and new orders rose to 61.7 from 58.8. Both figures marked the highest level for both indexes since April 2010.

The report also showed that firms were continuing to hire more staff with manufacturing payrolls increasing for a twelfth consecutive month.

“The strong reading rounds off the best quarter for factories for four years, adding to indications that the US economy rebounded strongly in the second quarter from the weather-related weakness seen at the start of the year. The survey data suggests that GDP should be set to rise by at least 3.0% after the 1.0% decline in the first quarter,” said Markit’s Chris Williamson.

Following the release of the data the Pound was holding close to a five and a half year high as it continued to find support from expectations that the improving UK economy will push the Bank of England into raising interest rates ahead of the world’s other major Central Banks.

Against the Euro the ‘Greenback’ gained little ground despite data released earlier in the session showing that the Eurozone’s economic recovery is faltering.

The US currency is finding some resistance from last week’s Federal Reserve policy meeting which widely disappointed investors with its dovish comments.

Fed chair Janet Yellen suggested that the nation’s interest rates will remain on hold for a sustained period.

Tuesday sees the publication of the latest new home sales data and CB Consumer confidence report. If both of those reports come in as strongly as today’s data then we could see some upward movement for the ‘Greenback’,

Updated at 09:30 on 24 June 2014

The Pound to US Dollar exchange rate (GBP/USD) was static as trading began on Tuesday. The dovish nature of the Federal Open Market Committee’s policy statement last week is keeping the US Dollar under pressure and the Pound was able to remain above psychological resistance of 1.70 overnight. While yesterday’s US Manufacturing Purchasing Managers Index and Existing Home Sales reports were upbeat, they had little in the way of a positive impact on the US Dollar. A notable lack of influential economic news may well restrain movement in the GBP/USD exchange rate as the day continues, although the US home sales and confidence figures could cause a flutter.