US Dollar (USD) to Pound (GBP) and Euro (EUR) Bullish: Poor Domestic Data Hurts EUR
The US Dollar (USD) to Pound (GBP) exchange rate has reached session highs of 0.5989 so far on Wednesday, whilst also trading at levels as low as 0.5938. This session has also seen the ‘Buck’ climb against the Euro (EUR) in a fairly tight range, attaining 0.7496 at its pinnacle and lows of only 0.7478.
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The US Dollar has reached popularity in recent weeks as the Federal Reserve has become more hawkish in their statements and US figures have exceeded expectations.
However Wednesday has seen a disappointing day by way of US data releases which have consequently seen the US Dollar soften in the currency market. US Mortgage Applications figures showed a lesser demand for mortgages in August at -2.7%, whereas July had proved more popular at 1.6%.
Furthermore and most disappointingly, US Advance Retail Sales statistics flopped at 0.0% in July, less than the forecast 0.2%. Today’s figure shows consumer spending and confidence has lessened from the 0.2% in June.
Industry expert Sireen Harajli commented: ‘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.’
Thursday will see the release of US Initial Jobless Claims and Continuing Claims figures which will be watched carefully as Chairwoman for the Federal Reserve, Janet Yellen has stated that any interest rate hikes will be dependent on positive jobs figures.
Meanwhile the UK has seen Unemployment Levels drop to 6.4%, the lowest level it’s been since the latter half of 2008. However, today has seen the UK Inflation Report produce details of a unanimous vote for maintaining current low Bank Rate policy.
Foreign exchange expert Neil Jones commented: ‘The market is busy pushing back its interest rate hike expectations well into 2015. That is the key why the Pound is being sold across the board.’
Disappointingly though, UK wage growth failed to impress. The Average Weekly Earnings figures showed a drop of -0.2% in June, following a -0.1% forecast and a positive 0.4% figure in May.
Economist Rob Wood commented: ‘We’ve got slack falling very quickly but wages remaining weak, giving ammunition to the hawkish and the dovish camps [within the BoE]. If you’re a dove, you say “wage growth hasn’t picked up—look at earnings growth” and see that it remains weak, so no sign of inflationary pressure.’
Conversely the Euro still appears to be heading South in the currency market—especially in the USD to EUR exchange rate—following a week of poor German and Eurozone figures.
Bank of Singapore representative Sim Moh Siong stated: ‘I think the trajectory (for the Euro) is still downwards. It’s just that in the near term there’s a bit of caution in terms of positioning.’ Siong suggested that markets are currently speculating that the Euro is labelled as bearish in the near future.
Wednesday saw Eurozone Industrial Production flop at 0.0%, despite forecasts to reach 0.2%.
For now the US Dollar appears to be softening against other majors; however, the Euro appears to be on a downward slope, whilst the Pound has fallen greatly with no hope in the horizon for a rally until interest rate hikes become prominent once more.
The present GBP to USD exchange rate is trading at 1.6715, whereas the Euro is trading against the ‘Greenback’ at 1.3402.
US Dollar Update
The US Dollar has seen a surge against the Pound today as there has been very little by way of UK domestic data released. Sterling is feeling the ramifications from yesterday’s faltering wage growth data and the miscorrelation between wages and unemployment. The dovish Bank of England Inflation Report has done nothing to help proceedings.
The ‘Greenback’ (USD) has also trended higher against the Euro today following disastrous European Gross Domestic Product Data (GDP). French GDB and Eurozone GDP both felt contraction reporting losses greater than forecast. Perhaps most influential, in terms of European economic struggles, was the German GDP which has dropped to 0.8% from the previous figure of 2.5%.
The Dollar has also had some less than ideal domestic data results today. Continuing Claims and Initial Jobless Claims both posted an unwanted gain. The damage is fractional, however, when you compare to the Euro and Sterling.