The Pound to US Dollar exchange rate recovered from a two-month low at the end of last week’s session following remarks from Federal Reserve Chairwoman Janet Yellen.
‘Cable’ Slides to 40-Day Low Despite UK Budget Surplus
Sterling started last week’s session on the back foot versus the US Dollar, sliding to a 40-day low on Tuesday despite a surprise UK budget surplus in July. The mild £0.184 billion figure marked the first July surplus for 15 years but it was not enough to materially lift the UK currency.
The Pound went on to slip to two-month lows against the ‘Greenback’ on Wednesday as anxieties over the slow pace of Brexit negotiations resurfaced.
UK GDP Strikes 0.3% in Q2
On Thursday UK GDP inched from 0.2% to 0.3%, which allowed ‘Cable’ to drift higher for a few hours. However, the pair quickly gave up its gains and settled close to two-month lows.
Sentiment shifted in Sterling’s favour on Friday, with Federal Reserve Chairwoman Janet Yellen choosing not to talk about future interest rate rises or winding down the central bank’s balance sheet during her speech at the Jackson Hole economic symposium. Traders interpreted the lack of policy talk as a bearish signal, and promptly began selling the US Dollar. GBP/USD managed to rally by more than 150 pips over the Bank Holiday weekend, boosted further by fears related to the chaos caused by Tropical Storm Harvey in Texas.
The Week Ahead
There are a number of high profile US ecostats due for release this week, however, the ‘Greenback’ could struggle to mount any further gains given Janet Yellen’s refusal to discuss monetary tightening last week. We could see the US Dollar tick higher on sturdy Q2 GDP and August non-farm payroll numbers, but large moves are not expected.
In terms of British data, the only significant report on the calendar is the August manufacturing PMI, which is tipped to slow slightly from 55.1 to 55.0 and shouldn’t spark too much volatility.