US Dollar (USD) Shrugs off Weaker Consumer Confidence – Investors Prep for Durable Goods Orders
UPDATE Wednesday 8:12 BST: The Pound US Dollar (GBP/USD) exchange rate continued to face pressure late into Tuesday and early Wednesday morning, with the ‘Buck’ largely unperturbed by a small contraction in US consumer confidence.
The confidence index fell from a score of 128.8 to 126.4 in June, but this fall was ultimately not sizable enough to diminish the near-term outlook for the ‘Greenback’ or indeed scare investors away from the currency.
Today, investors will be scrutinising the US durable goods orders figures for May, with the reading expected to make a small recovery from -1.6% to -0.9%.
Haskel Talks Down Pound (GBP) Exchange Rates – Dovish Concerns Hurt GBP/USD Outlook
UPDATE Tuesday 13:13 BST: The Pound US Dollar (GBP/USD) exchange rate encountered greater pressure on Tuesday as investors responded to statements from soon-to-be policymaker Johnathan Haskel.
Mr Haskel is set to replace known hawk Ian McCafferty at the Bank of England (BoE) in September, but investors are concerned that the Monetary Policy Committee (MPC) will be effectively losing a hawk and gaining a dove.
The Economics Professor argued that, whilst he agrees with the general trajectory of UK monetary policy, he is nonetheless worried about the risks of raising rates too quickly – especially in light of Brexit and global trade uncertainties.
This outlook sent GBP/USD tumbling by half a cent.
Upbeat US Manufacturing Activity Fails to Rock Pound US Dollar (GBP/USD) Exchange Rate
UPDATE 15:51 BST: US Dollar (USD) bulls were pleased with Monday’s run of US data, with a massive 6.7% rise in new home sales in May (up from the previous period’s -3.7% contraction) and a score of 36.5 in the US Fed Dallas manufacturing activity report giving the US Dollar a shot in the arm.
This seemed to have a minimal effect on the GBP/USD exchange rate, however, with the pairing holding steady despite the upbeat US data.
Pound US Dollar (GBP/USD) Exchange Rate Struggles despite Hawkish BoE
Sterling posted a strong performance against the US Dollar (GBP/USD) last week, briefly passing $1.33 before easing back into the $1.32 range as trading ended.
This Monday, the Pound has eased against the ‘Buck’ slightly but is continuing to hold above $1.32.
So what’s happened?
The main event last week was, of course, the Bank of England (BoE) rate decision, with the big news being that the bank’s Chief Economist, Andy Haldane had thrown his hat in with hawks Ian McCafferty and Michael Saunders – putting the number of votes for an immediate rate hike up from two to three, out of nine.
The three policymakers cited the current strength of the UK’s labour market and high levels of inflation as reasons necessitating a rise, and whilst it was ultimately insufficient, investors are now very hopeful for a rate hike as early as August this year.
There are, however, ongoing concerns regarding the state of global trade relations, and major anxieties regarding the Brexit negotiation process – with investors still worried about the prospect of a cliff-edge exit.
These concerns tempered hawkish optimism surrounding the currency, ultimately leaving Sterling slightly less desirable than the ‘Greenback’.
This Week for the GBP/USD Exchange Rate – Brexit and the EU Council Meeting in Focus
Monday’s data calendar was rather sparse for the UK, leaving investors to focus on this week’s looming European Council summit, set to start on Thursday.
Markets will be paying close attention to headlines relating to Brexit from this event, with Pound bulls keen for any signs of progress or indeed a greater degree of clarity regarding the UK’s future outside of the EU.
Conversely, a lack of progress or any sign that a ‘cliff-edge’ Brexit might still be on the cards could seriously harm demand for the Pound.
Beyond this, investors will be following speeches from the BoE’s Ian McCafferty, due on Tuesday, and Mark Carney, due on Wednesday.
If either of these policymakers reveal hawkish sentiment then we could see Sterling crawl even higher.
US Dollar (USD) Exchange Rates Bolstered as Trump Moves to Restrict Chinese Investment
The US Dollar (USD) found greater support on Monday in light of yet another escalation in the US-China trade war.
The Trump administration announced intentions to restrict Chinese investment in US companies and start-ups relating to the aerospace and robotics sectors – a sizable change in the US’s open investment regime.
One might presume that this would be bad news for the US Dollar, but investors have begun to favour the currency in light of these escalations simply because the tariff measures and greater protectionism policies could actually foster inflation – thus necessitating an even more aggressive monetary policy at the US Federal Reserve.
Looking ahead, investors will soon be responding to the US Dallas Fed manufacturing activity index for June, with a forecast fall from 26.8 to 23.0, followed by the overarching US consumer confidence figure, due on Tuesday.
If this data misses its mark then we could see GBP/USD move higher.