USD/GBP and USD/EUR Exchange Rates Pare Gains Before Rate Decisions
USD/GBP Losses Ground on Manufacturing Surge
The US Dollar to Pound Sterling (USD/GBP) exchange rate softened yesterday as the Pound’s appeal increased following the publication of the UK’s Manufacturing PMI.
If you're looking to make an international money transfer, we recommend TorFX.
The index unexpectedly increased to a three-month high, helping to dispel some concerns regarding the UK’s economic outlook and the Pound rose across the board.
Over the course of the European session GBP/USD continued to trend around the support level of 1.6000.
However, gains were limited as the US Dollar received a boost of its own in the form of the ISM Manufacturing gauge for October. The measure of the manufacturing sector increased from 56.6 to 59.0 instead of declining to 56.1 as forecast.
Other US reports were less encouraging, with construction spending falling by -0.4% instead of climbing the 0.7% anticipated. The final Markit Manufacturing PMI was also negatively revised, being cut from 56.2 to 55.9.
In a statement issued with the data Markit economist Tim Moore stated; ‘October’s survey highlights that the revival in US manufacturing conditions remains on track. Production levels expanded at an impressive rate by international standards and overall momentum is still stronger than the post-recession trend. However, the latest figures indicate that the recovery has lost some intensity at the start of the fourth quarter, reflecting subdued export demand from the euro area and key emerging markets.’
If today’s UK Construction PMI surprises to the upside the Pound could extend gains against the US Dollar. Further movement could also be occasioned by the US trade balance report.
The US Dollar to Pound Sterling (USD/GBP) exchange rate is currently trending in the region of 0.6250
USD/EUR Forecast to Fluctuate before ECB Decision
Before the publication of the Eurozone’s Producer Price Index the US Dollar to Euro (USD/EUR) exchange rate was trading in a slightly softer position.
Yesterday the common currency came under pressure as final Manufacturing PMI’s for the Eurozone and its largest economies were negatively revised.
However, the Euro was able to fight back a little on Tuesday despite speculation that the European Central Bank will outline additional stimulus measures when it gathers later this week.
As the threat of deflation in the Eurozone is weighing heavily on the Euro, if the currency bloc’s Producer Price Index registers an unexpected month-on-month decline the common currency could soften against the US Dollar.
The US Dollar to Euro (USD/EUR) exchange rate is currently trending in the region of 0.7995
European Commission Growth Forecasts Impact Pound Sterling (GBP) and Euro (EUR)
The US Dollar to Pound Sterling (USD/GBP) exchange rate strengthened by almost 0.2% during European trading even as the UK’s growth forecasts for 2014 and 2015 were positively revised.
While the European Commission positively adjusted the UK’s expansion prospects, an unexpectedly steep decline in the UK’s Construction PMI prevented the Pound from making any gains.
Meanwhile, the US Dollar to Euro exchange rate also rallied as the European Commission added to concerns for the currency bloc by cutting its previous growth estimates.
The US Dollar to Euro (USD/EUR) exchange rate achieved a high of 0.8013.
US Trade Deficit Widens, US Dollar (USD) Declines
During the North American session the US Dollar to Pound (USD/GBP) and US Dollar to Euro (USD/EUR) exchange rates declined as the US Dollar came under pressure from a less-than-impressive US trade balance report.
The data showed that the US trade deficit swelled in September, with the shortfall increasing by 7.6%.
The deficit widened from 40 billion US Dollars to 43 billion US Dollars – the largest recorded since May.
A decline in exports was responsible for the disappointing figure.
As commented by economist Stuart Hoffman; ‘You can’t expect with the global economy being as weak as it is that US exports would continue to grow in double digits. Given the global environment and the US being far out ahead, you can expert the trade deficit will widen and not be much of a positive for growth in the fourth quarter.’
Separate US data showed that Factory Orders declined by -0.6% in September, in line with expectations.
After the reports were published the US Dollar to Pound Sterling (USD/GBP) exchange rate was trading in the region of 0.6248
The US Dollar to Euro (USD/EUR) exchange rate was trading in the region of 0.7993
Republicans Victorious in Midterm Elections, US Dollar Gains
Although the US Dollar (USD) weakened on Tuesday after the US trade deficit was shown to have widened, the safe-haven currency staged a rebound after the Republicans won control of the Senate in the US midterm elections.
As well as advancing against the Pound (USD/GBP) and Euro (USD/EUR) the US Dollar was also stronger against the Yen.
As commented by industry expert Shinji Kureda; ‘The fact that Republicans won a senate majority drove the Dollar higher against the Yen. It was thought that the election itself wouldn’t be seen as a trigger to move the market but the midterm election anomaly and also the fact that Republicans tend to be market-friendly in their policies might have been the focus.’
In the hours ahead further US Dollar movement could be caused by the highly influential US ISM Non-Manufacturing PMI.
BoE and ECB Announcements Ahead
The US Dollar to Pound Sterling (USD/GBP) exchange rate edged away from the highs achieved yesterday as the Pound was supported by speculation that Yildiz Holding intends to buy the UK biscuit company United Biscuits.
The deal would be worth 2 Billion Pounds.
The USD/EUR exchange rate fluctuated as investors focused on the upcoming European Central Bank interest rate decision. Given the recent reports of dissent among policy makers, the ECB’s accompanying statement will be one to watch.