US Dollar (USD) Exchange Rate Holds Declines against Pound after US Deficit Narrows
While the US Dollar came under pressure on Friday thanks to a mixed bag of employment figures, the currency was supported on Monday by the news that the US trade deficit narrowed in March.
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Friday’s non-farm payrolls report revealed a surprisingly strong decline in unemployment, a fact which initially caused a ‘Greenback’ spike.
However, as investors digested the fact that the participation rate dropped, the US Dollar shed earlier gains.
The safe-haven currency failed to recover its advance over the three-day weekend.
Although today’s data showed that the US trade gap didn’t shrink by quite as much as expected, it still narrowed from a revised 41.9 billion Dollars in February to a deficit of 40.4 billion Dollars in March.
40.0 billion Dollars had been forecast.
The decline was largely due to a surge in domestic exports.
Imports advanced by 1.1 per cent month-on-month while exports jumped by 2.1 per cent.
As observed by financial economist Paul Edelstein; ‘Exports rebounded after a few weaker months, and that’s good to see. Imports were also up, and that’s a good sign because it suggests that business and consumer spending are back on track. In general, this is a pretty good report.’
However, while the report helped the ‘Greenback’ trim declines against several of its rivals, it remained in a weaker position against a bullish Pound.
Sterling surged by 0.7 per cent against the US Dollar during the European session as data compiled by Markit revealed that the UK’s services sector performed strongly in April.
The services gauge jumped to 58.7 last month, its strongest result for the year so far and further proof that the second quarter got off to a good start for the UK.
According to London-based economist Michael Saunders; ‘All the signs are that Britain is booming. The need for the current ultra-loose policy stance is receding rapidly, in our view. Indeed, the current policy stance may well – if sustained for much longer – start to create a dangerous bubble mentality in housing and other assets.’
Tomorrow volatility in the US Dollar could be triggered by Federal Reserve Chairwoman Janet Yellen’s testimony to the Economic Committee.
As the week progresses the US reports to focus on include initial jobless claims and JOLTs job openings.
Developments in the Ukraine situation and news out of China could also have an impact over the next few days.
As it stands the US Dollar is trading against the Pound in the region of 0.5887 and against the Euro in the region of 0.7176