US Dollar to Pound Sterling (USD/GBP) Exchange Rate at five-year low as US trade data disappoints

The US Dollar fell to its lowest-level in five-years against the Pound on Tuesday after data showed that the USA’s trade deficit narrowed less-than-expected.

Earlier in the session the Pound was buoyed by the release of data which showed that the UK’s dominant service sector expanded more-than-forecast in April.

The UK services PMI increased to 58.7, beating forecasts for a figure of 57.6. It also showed that employment in the service sector increased. Following the release of the report the USD/GBP exchange rate slid to a four-and-a-half year low.

“This is a very positive report on the UK services economy, especially if we consider the employment sub index. The report suggests this spare capacity slack is being squeezed tighter and the Bank of England will soon run out of room to keep policy loose. Even at these lofty heights Sterling still has further to go,” said a market analyst at Monex Europe Ltd.

The currency pair then fell to its lowest-level since October 2008 after US trade data came in below economist expectations.

According to the Washington based US Commerce Department the USA’s trade deficit narrowed less than forecast. The deficit narrowed to $40.38 billion in March, an improvement on February’s figure of $41.87 billion but worse than forecasts for a narrowing to $40.30 billion.

The report did show however that US exports climbed to their best levels in nine-months and hinted that the global economic recovery is gathering strength.

“Exports rebounded after a few weaker months, and that’s good to see. Imports were also up, and that’s a good sign because it suggests that business and consumer spending are back on track. In general, this is a pretty good report,” said an economist from IHS Global Insight Inc.

The Pound could push higher tomorrow if the latest Halifax house price data shows a further increase in property prices. The major event for the US Dollar will be the Federal Reserve Chairman’s speech and mortgage applications data.

Update for US Dollar to Pound (USD/GBP) – 07/05/14

The US Dollar was holding steady at a near five year low against the Pound on Wednesday.

The US currency came under pressure as Federal Reserve Chairman Janet Yellen prepared to give a testimonial to the Congress. Economists are widely expecting Ms Yellen to say that interest rates in the world’s largest economy will remain on hold for longer despite the release of better-than-expected nonfarm payrolls data last week.

The currency received some support from a report which showed that applications for US home mortgages climbed last week. Applications increased by 5.3% in the week ending May 2nd and marked a rebound from the previous weeks figure which was the lowest seen since December 2000.

US Dollar (USD) Exchange Rates