The Pound to US Dollar exchange rate stabilised last week after succumbing to a number of seven-year lows.
Sterling tanked against the ‘Greenback’ on Tuesday in response to a decidedly dovish statement from the Governor of the Bank of England. BoE chief Mark Carney pushed back market rate hike expectations by admitting that bank officials do not currently have any plans to start tightening policy in the near term. ‘Cable’ skidded lower by around a cent in reaction to the statement and subsequently touched its lowest point for over seven years.
On Wednesday British unemployment printed at its lowest level for nearly nine years, which gave the Pound some respite. However, the uptick in Sterling sentiment remained muted due to a disappointing dip in wage growth from 2.4% to 1.9%. US CPI came in at 0.7% during the afternoon, which marked an improvement on the previous score of 0.5% but a disappointment on expectations of 0.8%.
Thursday saw GBP/USD strike another new seven-year low as leaders discussed the potential negative consequences of a British exit from the European Union at the World Economic Forum in Davos.
The Pound to US Dollar exchange rate is currently sitting at exactly the same level it was at this time last week, thanks to a surprise improvement in December’s public finance figures. Data showed that the government only needed to borrow £7.5 billion to balance the books last month, which was down on £11.7 billion a year earlier.
There are a few important releases on the calendar this week that could potentially give Sterling a helping hand against the US Dollar.
On Wednesday the Federal Reserve is set to announce its interest rate decision for January. Speculators are fairly sure that the Fed will opt against another rate hike and if the decision is followed by dovish remarks from officials it is possible that we could see the US Dollar hit as traders roll back their US hike bets.
On Thursday UK growth data is expected to signal that economic activity accelerated from 0.4% to 0.5% in the final quarter of 2015 and this could prop-up the Pound. US data is anticipated to point to a -0.5% contraction in durable goods orders.
Friday’s US GDP could also hamper the ‘Greenback’ if, as expected, it shows that annualised growth slowed from 2.0% to 0.8% in the fourth quarter. On a quarterly basis this would represent an expansion in GDP of just 0.2%.
Heads Up
Summary of major upcoming data releases that we think may move the market.