US Dollar Firm Against Pound (USD/GBP), USD/HKD Fluctuates Amid Hong Kong Fears
The US Dollar has seen gains on Tuesday versus major currencies such as the Pound (USD/GBP) presently trading in the region of 0.6166. Meanwhile, the US Dollar has been softer against the Hong Kong Dollar (USD/HKD) currently residing at 7.7652.
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The US Dollar has been a favourite amongst investors in recent months as the prospect of US interest rate hikes are priced in. Recent remarks made by hawkish Federal Reserve Presidents have bolstered the ‘Buck’ against other major peers. Dallas Fed President Richard Fisher stated that interest rate increases will occur ‘sooner rather than later’, whilst Kansas City Fed President Esther George commented that she felt ‘most anxious’ to begin the normalisation process to monetary policy in the near future.’
However, Tuesday’s US domestic data has failed to impress with September’s Consumer Confidence falling far lower than economists’ had predicted. August saw consumer morale reach a healthy 93.4, whilst September was expected to soften slightly to 92.5; however, the report has shown a drop to 86.0. Economist Lynn Franco suggested: ‘Consumers were less confident about the short-term outlook for the economy and labour market and somewhat mixed regarding their future earnings potential.’ Furthermore, the Chicago Purchasing Manager Index (PMI) which measures business conditions has also fallen lower in September to 60.5, weaker than August’s 64.3.
Meanwhile, Tuesday has seen an interesting day for the Hong Kong Dollar (HKD), which has increased more than expected despite city protests. The Hong Kong currency has fallen to its lowest level in two years versus the US Dollar as masses of demonstrators dominated the streets over political conflict between Hong Kong and China.
Furthermore, the current political unrest in Hong Kong has caused the US Dollar to pause in its recent rally. Fears emanate from investors that such tensions could see Beijing’s response damage the region’s economy. Forex expert Boris Schlossberg commented: ‘The situation in Hong Kong is starting to weigh on people. The [US] Dollar just had this massive rally. You are beginning to see some profit-taking.’
Meanwhile, in the UK, economic growth excelled higher than economists had forecast in the second quarter. Gross Domestic Product (GDP) figures were revised to suggest a rise of 0.9% occurred in the second quarter rather than the initially predicted 0.8%. Sterling was bolstered as a result; however, Consumer Confidence figures have weighed down the Pound exchange rate after it dipped into the negatives at -1, instead of falling to 0 like economists had predicted. Researcher Nick Moon suggests: ‘Many people are not themselves feeling any better off despite the growth in GDP, and this may be tempering the impact of positive media coverage of the economy.’
US Dollar (USD) Exchange Rate Forecast
The US Dollar will trade amid an influential day on Wednesday as the release of US Manufacturing, Mortgage Applications, Employment Change, Construction Spending and Prices Paid statistics are released. In the USD to GBP exchange rate, the UK will see only one piece of domestic data published on Wednesday, the Markit Manufacturing Purchasing Managers’ Index, which is expected to see a slight increase from the former 52.5 to 52.7. The Hong Kong Dollar (HKD), meanwhile, will be largely altered by the current political tensions and the outcome of the demonstrations. The US Dollar and Pound may see fluctuations in the upcoming months as the prospect of rate hikes looms ever closer for both the US and UK.
The US Dollar maintained a stronger position against the Pound on Wednesday ahead of the release of the UK’s Markit Manufacturing PMI.
If the gauge of manufacturing impresses Sterling could finally advance on its North American counterpart. On the other hand, a disappointing result could inspire GBP/USD losses.
The USD/HKD exchange rate was trending slightly higher as the middle of the week arrived having softened from a high of 7.7684.
The situation in Hong Kong may trigger additional USD/HKD movement before the end of the week.