The US Dollar tumbled against the Pound, Euro and other major peers on Wednesday after data showed that US economic growth fell sharply in the first quarter of 2014 as extreme winter weather harmed the economy.
According to the Washington based Commerce Department, GDP grew by just 0.1% in the first quarter, a sharp decline from the 2.6% rise recorded in the final quarter of 2013. The figure was also well below economist forecasts for a rise of 1.2%.
Extreme winter weather had a huge impact on the world’s largest economy. Snow covered half of the country in the first few months of the year keeping consumers away from the shops and preventing builders from constructing new homes and structures.
A separate report however suggested that the downturn in GDP may only be temporary. Data released by the payroll processing firm ADP showed that private employment jumped by 220,000 this month beating economist expectations for a rise of 210,000. March’s figures were also revised upward. This left the Pound to US Dollar (GBP to USD) exchange rate around 0.5937 with the USD to Euro rate falling to 0.7217.
Despite the negative GDP data the Federal Reserve is not expected to refrain from tapering its quantitative easing programme. Instead it is expected to taper by an extra $10 billion. The FOMC releases its policy decisions tonight.
“US first quarter 2014 GDP was a disappointment if you focus solely on the headline figure. But the market was already geared up for weakness given awful first quarter weather and the real excitement this week will be tonight’s FOMC decision and Friday’s payrolls data. The second quarter will most likely see a decent bounce from this weakness, even as headline forecasts for the rest of 2014 are likely to be revised down a result of this poor start,” said a strategist at ING Bank.
The Euro found support against several peers after data released earlier in the session showed a slight rise in inflation. The increase was expected to ease pressure on the European Central Bank to take measures to fight off the threat from low inflation.
Sterling meanwhile continued to find support from yesterday’s upbeat GDP data and a consumer confidence report which showed that confidence amongst UK consumers has reached its highest level since 2007.
Pound to US Dollar update – 01/05/04
The US Dollar fell to its lowest level in five-years against the Pound on Thursday following the release of stronger than expected UK manufacturing data and a report which showed that UK house prices surged to new highs.
The USD to GBP exchange rate is currently trading around 0.5915.
Pound to US Dollar is now trading beyond the 1.69 level and is at its highest level since August 2009. The positive data increased trader speculation that the Bank of England will raise interest rates sooner than forecast.
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
US Dollar,
,Pound Sterling,0.5937 ,
US Dollar,,Euro,0.7217,
US Dollar,,Canadian Dollar,1.0954 ,
US Dollar,,Australian Dollar,1.0774 ,
Pound Sterling,,US Dollar,1.6844 ,
Euro,,US Dollar,1.3860 ,
[/table]
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