The US Dollar weakened against a stronger Pound on Tuesday as mixed data releases caused investors to continue to fret over the USA’s economic outlook.
The ‘Greenback’ has been under pressure since last week’s gross domestic product data release which came in well below expectations.
The report showed that the world’s largest economy contracted by 2.9% in the first quarter.
The weak figure increased speculation that the Federal Reserve will choose to maintain interest rates lower for an extended period of time.
Today saw the release of several US data releases. Investors had been hoping that the reports would show a strong rebound from last months, aside from Markit’s latest manufacturing report the other data was disappointing.
According to the Washington based Commerce Department, construction spending in the US rose less-than-expected in May, which could prompt calls for a further downgrading for the next quarters growth estimates.
Spending inched higher by just 0.1% to an annual level of $956.1 billion.
Analysts had been expecting a rise of 0.5%. April’s figures were revised higher to 0.8% taking some of the sting out of the report.
Despite that the report will add to suggestions that the economy’s rebound from the extreme weather seen in the winter will disappoint the markets.
The Institute for Supply Managements factory index also disappointed by remaining largely unchanged in June.
The index ticked lower to 55.3, down from the 55.4 seen in the previous month and below expectations for a rise to 55.9.
Markit’s manufacturing PMI however contrasted with that figure by rising to its best level in over four years.
Its final PMI rose to 57.3 in June, its best reading since 2010.
“Business was booming at US goods producers in June. Factory output, order books and payroll numbers rose at some of the fastest rates we’ve seen since the recession, rounding off the best quarter for four years in terms of manufacturing expansion,” said Chris Williamson, the chief economist at Markit.
The mixed data offered little in the way of support for the US Dollar as it remained near to a six-year low against the Pound.
The UK currency was trading stronger following the publication of a manufacturing PMI which increased to 57.5, beating economists’ forecasts for a figure of 57.0. The data also showed that new orders continued to increase on the back of stronger domestic and export demand. Job creation in the sector also rose to its highest level in 39 months, led by increases in small firms.
The data increased expectations that the Bank of England could raise interest rates before the end of the year.
Investors will now be looking ahead to Wednesday’s speech due to be given by Fed chairman Janet Yellen and the release of the latest ADP Employment change figures.
UPDATED: 09:20 GMT 02 July, 2014
US Dollar to Pound (USD/GBP) Exchange Rate Softer
The US Dollar to Pound exchange rate declined yesterday as the UK’s manufacturing sector was shown to have performed more impressively than economists had anticipated.
The appeal of the US Dollar was also dented as US ISM and Markit manufacturing reports fell short of forecasts.
Today volatility in the USD/GBP exchange rate could be occasioned by the UK’s Construction PMI.
However, investors with an interest in the US Dollar to Pound exchange rate will also be taking a keen interest in the US Factory Orders and ADP Employment Change reports.
Federal Reserve Chairwoman Janet Yellen is also due to speak in Washington later today.
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,0.5831 ,
US Dollar,,Euro,0.7306 ,
US Dollar,,Canadian Dollar,1.0657 ,
US Dollar,,Australian Dollar,1.0546 ,
Pound Sterling,,US Dollar,1.7150 ,
Euro,,US Dollar,1.3688 ,
[/table]
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