 |
The pound US dollar exchange rate ended Tuesday at approximately the same level that it had started the session at. The pair slipped to a low of US$1.2815, before rallying to a high of US$1.2874 and then easing back to the flat line to close. The pair is advancing in early trade on Wednesday.
The pound initially declined on Tuesday following disappointing UK labour market data. According to the Office of National Statistics average wage growth slowed to 3.6% year on year in the three months to September. This was down from 3.8% in the previous month. The data also showed the biggest annual decline in job vacancies in a decade as the labour markets shows signs of weakening ahead of Brexit. The Bank of England will be more inclined to cut interest rates than raise them should wage growth continue to slow.
The pound received a lift from the most recent polls. The latest YouGov poll showed that the Conservatives extended their lead after the Brexit party decided not to stand against them. A strong Conservative win would mean that Boris Johnson’s Brexit deal could move quickly through Parliament, giving the UK the best chance to leave the EU by 31st January with a deal, which is pound positive.
Today investors will look to UK inflation data. Analysts predict that inflation ticked lower in October to 1.6%, down from 1.7%. Inflation moving further away from the Bank of England’s 2% target could drag on the value of the pound.
All Eyes On Powell’s Congressional Testimony
The dollar remained supported in the previous session as US — China trade headlines drove demand for the greenback. President Trump gave a speech at the New York Economic Club, where he said that a phase one trade deal between the two powers may be near. President Trump’s optimism drove US stock markets to fresh all time high, increasing demand for the dollar.
Today dollar investors will look towards US inflation figures. Analysts are expecting inflation to hold steady in October. Federal Chair Jerome Powell will also give a testimony before Congress today and tomorrow on the state of the economy. His appearance comes after the Fed cut interest rates for a third time in as many meetings. A cautious sounding Powell could weigh on the dollar.
| What do these figures mean? |
| When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written: 1 GBP = 1.28934 USD Here, £1 is equivalent to approximately $1.29. This specifically measures the pound’s worth against the dollar. If the US dollar amount increases in this pairing, it’s positive for the pound. Or, if you were looking at it the other way around: 1 USD = 0.77786 GBP In this example, $1 is equivalent to approximately £0.78. This measures the US dollar’s worth versus the British pound. If the sterling number gets larger, it’s good news for the dollar. |
