The USD (USD) to GBP Exchange Rate strengthened on Wednesday as UK wage growth data reduced expectations for a Bank of England interest rate hike. The US Dollar to Euro (EUR) Exchange Rate eased on disappointing retail sales data in the world’s largest economy.
Against other peers such as the Australian Dollar (AUD) and Norwegian Krone (NOK) the ‘Greenback’ weakened.
The declines came after the Washington based Commerce Department said that retail sales in the USA declined for a second consecutive month in July.
The soft data raised concerns that the US economy is not as strong as thought and casts doubt over an interest rate increase by the Federal Reserve.
The report showed that retail sales stagnated on a monthly basis and declined on a yearly basis. Monthly sales saw no changed from June’s rise of 0.2% and disappointed economists who had been forecasting for another increase of the same amount in July.
The figure was the worst seen in six months. Yearly sales declined from the 4.3% in June to 3.7% in July.
The disappointing sales report, which is at odds with data on employment, manufacturing and services sectors that have suggested the economy was growing solidly, could see the Federal Reserve in no rush to start raising interest rates.
The Fed in recent months has focusing on justifying the use of its easy monetary policy and as such, the weak data will no doubt be used as ammunition to its argument that things are not as positive as economists may think.
‘The number was weaker than expected. This data doesn’t paint a picture of robust consumer spending at this point, so this is why we’re seeing this kind of reaction in the market,’ said a strategist at Mizuho Bank in a telephone interview with Bloomberg news.
Sterling remained at its lowest level in ten weeks against the ‘Greenback’ after the Office for National Statistics reported that wage growth including bonuses fell by 0.2% on a quarterly basis.
The effects of the disappointing data were then compounded by the Bank of England cutting its forecast for UK wage growth by half.
The Bank also said that wage growth would be vital in determining how quickly interest rates will rise.
As a result, investors pared their bets for a rate rise occurring before the end of the year and sent the Pound tumbling against all of its major peers.
US Dollar Exchange Rate Forecast
The ‘Greenback’ is likely to remain higher against the Pound until at least Friday due to a lack of market moving UK data in Thursday’s session. The end of the week will see the publication of the latest UK GDP data, which could allow the Pound to recover some space if it comes in positively.
Investors will keep an eye on Thursday’s US Jobless Initial and continuing Jobless Claims Data. Another strong showing is likely to see the US Dollar push higher against the Euro, which in turn is likely to be weakened by Eurozone GDP data.
With concerns over Ukraine still in the spotlight and a weakening Eurozone economy, the single currency is highly likely to remain under pressure for the near future.
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,0.5988 ,
US Dollar,,Euro,0.7478 ,
US Dollar,,Canadian Dollar,1.0916 ,
US Dollar,,Australian Dollar,1.0741 ,
Pound Sterling,,US Dollar,1.6693 ,
Euro,,US Dollar,1.3380 ,
[/table]
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