Foreign Currency Market Update – GBP / USD Update
Sterling rose by around half a cent against the US Dollar last week as second quarter UK economic growth outpaced the US and American wages slowed to a record low.
GBP/USD jumped from 1.5525 to 1.5560 last Monday even though a US durable goods orders report showed that sales volumes increased 3.4% YoY in June.
The Pound ticked higher to 1.5610 on Tuesday as British investors took heart from a sturdy second quarter GDP score of 0.7%, which marked an upbeat improvement on the Q1 print of 0.4%. Later in the day US consumer confidence plunged from 99.8 to 90.9, which weighed on demand for the ‘Greenback’.
On Wednesday the Pound to US Dollar exchange rate struck a monthly high of 1.5690 as traders responded to the latest policy announcement from the Federal Reserve. The Fed’s reluctance to talk up an interest rate rise in September was seen as a dovish signal and subsequently the ‘Greenback’ slid against Sterling as rate hike bets were adjusted.
‘Cable’ remained fairly flat on Thursday as US second quarter GDP printed at an annualised rate of 2.3%, which was slightly slower than the UK’s annual growth of 2.6%.
The Pound ended the week at around 1.5640 as September Fed rate hike bets were dealt another blow by a dismal 0.2% US wage growth report, which was the lowest figure since records began in 1982.
There are a fair few important economic releases to look out for this week but three stand out above the others.
1) The UK service sector report on Wednesday, which could give the Pound a bit of a boost if it meets the median market consensus of 58.0.
2) The Bank of England inflation report on Thursday, which could send rate hike bets soaring if it features positive revisions to UK growth and inflation expectations.
3) The US non-farm payroll report on Friday, which is tipped to show a steady increase of 225,000 new jobs in July.
If the BoE inflation report features hawkish language and positive forecasts then we could see GBP/USD rise towards 1.5800 but a bumper US NFP report above 275,000 could temper Sterling’s gains.
Heads Up
Summary of major upcoming data releases that we think may move the market.