USD Exchange Rate Strengthens against GBP and EUR as Consumer Sentiment hits Highest Level Since 2007

The US Dollar (USD) strengthened against the Pound (GBP), Euro (EUR) and other major peers on Friday after stronger than forecast economic data bolstered sentiment towards the currency.

Consumer sentiment data was the main driver for the ‘Greenbacks’ advance as it showed that sentiment amongst American shoppers rose to its highest level in more than seven years in October. Housing Starts data also came in stronger than expected and Building Permits data widely matched economist expectations.

According to the Thomson Reuters/University of Michigan preliminary report on the reading of the overall index for consumer sentiment for October, consumer sentiment rose to a reading of 86.4, the highest recorded since July 2007. The data beat economist forecasts for a decline to 84.1 from the preceding month’s figure of 84.6.

‘The data show absolutely no signs that fear and panic is about to overtake the consumer sector,’ said survey director Richard Curtin.

The survey’s gauge of consumer expectations also rose to hit 78.4, the highest since October 2012, from 75.4 and beating a forecast for 74.4.

The survey’s barometer of current economic conditions was unchanged at 98.9 and beat its forecast of 98.0.

Sentiment Improved

The data added to Thursday’s data released by the Washington based Department of Labour, which showed that the number of Americans filing for unemployment benefits in the week ending on October 11 fell to a 14-year low.

Friday’s positive data helped to ease the fear that had swept through the global financial markets earlier in the week.

Earlier in the session, the Pound was weakened by comments made by Bank of England chief economist Andrew Haldane.

In a speech, Mr Haldane said that the BoE should leave interest rates unchanged at current lows in order for the UK to avoid sliding into a period of economic stagnation. The comments softened the Pound as economists pared back that their bets that a rate hike will occur early in 2015.

The most likely time for a rate hike is now in the summer of 2015.

Sentiment towards the Euro remains weak as the markets remain concerned that the single currency is heading towards a triple-dip recession. Concerns over deflation increased on Thursday following the release of weak inflation rate data.

Earlier in the session, the Euro managed to recover some lost ground after European Central Bank Board Member Benoit Coeure said that the ECB still expects the Eurozone economy to grow in the third and fourth quarters of 2014.