US Dollar (USD) Exchange Rate Close to 5-Year Low against Sterling, USD/EUR Weaker
The US Dollar (USD) exchange rate broadly softened on Wednesday after US growth figures fell short of forecasts and the Federal Open Market Committee delivered a dovish policy statement.
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It was expected that the Federal Open Market Committee (FOMC) would continue with the steady tapering of stimulus and, while it remains upbeat about the US economic outlook, the central bank also reiterated its intention of keeping interest rates on hold.
One New York-based economist said this of the decision; ‘Tapering is on autopilot. You need a much bigger swing in the data to stop tapering and much more weakness than just a 0.1 per cent print on GDP.’
Although US initial jobless claims increased by more than expected in the week ending April 26th, US public spending surged by the most for five years as people used the warmer weather as an opportunity to shop.
The 0.9 per cent increase in household spending as considerably more than the 0.6 per cent increase expected.
Personal income rose by 0.5 per cent in March, also more than the 0.4 per cent forecast.
Meanwhile, the pace of US manufacturing output jumped by the most this year in April.
The Markit manufacturing PMI measure came in at 55.4 last month, as originally estimated, while the US Institute of Supply Management’s index rallied from 53.7 to 54.9 – a 2014 high.
In a statement issued with the figures Chris Williamson, a chief economist with Markit, noted; ‘The April PMI represents a good start to the second quarter. The upturn in manufacturing output and new orders signalled by the survey suggest that the economy should rebound after the disappointing 0.1% annualised GDP growth rate seen in the first three months of the year.’
However, he added that while Gross Domestic Product (GDP) might rebound in Q2; ‘the updated manufacturing numbers are not strong enough to offset the softer trend in the flash services PMI, suggesting that the underlying growth rate of the economy has weakened since late last year.’
Tomorrow’s highly influential US non-farm payrolls report will be of interest before the weekend and a strong employment number could boost the US Dollar.
As it stands the US Dollar is trading against the British Pound in the region of 0.5921 and against the Euro in the region of 0.7212