US Dollar to British Pound (USD/GBP) Exchange Rate May Fall Further after Yellen Speech
The US Dollar to Pound (USD/GBP) exchange rate continued trending in the region of an over five-and-a-half year low on Tuesday as investors reacted to a stream of influential economic reports.
During the European session the US Dollar was able to advance on the Euro thanks to a run of less-than-impressive fundamentals for the Eurozone and its largest economy.
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Unemployment in Germany was shown to have increased unexpectedly while joblessness in the Eurozone held at 11.6%.
Initial Manufacturing PMI estimates for both the currency bloc as a whole and its largest economy were also knocked lower, although both held above the 50 mark separating growth from contraction.
Meanwhile, the US Dollar was testing fresh lows against the Pound as the British currency was bolstered by the news that the UK’s manufacturing sector expanded at a faster-than-forecast pace in June.
The measure produced a reading of 57.5 last month, just up from level of 57.0 registered in May and beating expectations for a decline to 56.8.
The US Dollar to Pound (USD/GBP) exchange rate slid to a low of 0.5829, with the Pound pushing and holding above technical resistance of 1.71 US Dollars.
As highlighted by one London-based strategist; ‘The latest move higher in the Pound has been driven by the better-than-expected PMI. Sterling looks to have further upside from here with more room for rising rate expectations’.
As the North American session opened, further modest movement in the ‘Greenback’ to Sterling exchange rate was occasioned by US data, including the nation’s final Markit Manufacturing PMI and the US ISM Manufacturing gauge for June.
The final Markit PMI figure was revised down slightly from 57.5 to 57.3.
Economists had expected no change. The ISM measure eased from 55.4 to 55.3 instead of advancing to 55.9.
The Markit PMI data showed the most impressive improvement in US business conditions for more than four years, with job creation in the manufacturing sector rallying to a four-month high.
Markit economist Chris Williamson observed; ‘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’
However, there were negatives and Williamson went on to state that export performance ‘remains a real disappointment, and trade will likely act as a drag on the economy again in the second quarter.
If worries about tighter policy from the Fed start to dampen domestic demand at the same time as exporters are struggling, growth could slow again in the second half of the year.’
The US Dollar to Pound (USD/GBP) exchange rate is likely to hold declines overnight, but notable volatility in the paring could be occasioned tomorrow as UK construction figures and US factory orders data is published.
A measure of Economic Optimism for the US also slid from 47.7 in June to 45.6 in July. A reading of 48.0 has been anticipated.
As it stands the US Dollar to British Pound (USD to GBP) exchange rate is trading in the region of 0.5831 and the US Dollar to Euro (USD to EUR) exchange rate is trading in the region of 0.7309.
UPDATED 10:35 GMT July 2, 2014
The US Dollar is waiting for Federal Reserve Chairwoman Janet Yellen’s speech today, which will be made at 16:00 GMT. Following Yellen’s last public statement the US Dollar fell as she expressed a lack of confidence in the recovery of the American economy and future interest rate rises.
However with US factory output increasing in June, Yellen might just adopt a more optimistic stance.
Economist Joshua Shapiro stated: ‘Manufacturing is back on track. It’s growing at a solid pace.’
The US economic growth however can’t compete with the UK’s upward trajectory. Wednesday has revealed another surprise by way of UK Construction PMI; although being set to drop from 60 to 59.8, the data has instead ignored forecasts and risen to a substantial 62.6.
Moreover House Price data has shown an increase in annual prices from 11.1% to 11.8%, bypassing the prediction again of a rise to only 11.2%.
Nationwide representative and economist Robert Gardner commented on London house prices rising by 26% in June: ‘The annual pace of growth in the capital will probably start to slow in the quarters ahead, given the high base for comparison from the third quarter of 2013 onward.’ He continued that there was ‘anecdotal evidence from surveyors and estate agents that activity may be starting to moderate.’
With the UK property market hotting up and a series of positive UK statistics increasing Sterling’s appeal, the Pound is bullish against the ‘Buck’ and other majors, dominating the currency market with its growing strength.
The USD/GBP pairing is currently trading at 0.5824.