The pound trended lower once again versus the US dollar on Wednesday. The pound has given back all the post-election gains. The pair dropped through US$1.31 and is targeting US$1.30.
The pound declined in the previous session after the release of consumer price inflation data. Inflation remained steady in November at 1.5%. This was better than the decline to 1.4% that analysts had forecast. Core inflation, which excludes more volatile items such as food and fuel held at 1.7%. Both readings are short of the Bank of England’s 2% inflation target. This inflation data will do little to calm concerns that the Bank of England (BoE) could be heading towards a rate cut next year.
Today the BoE will give its monetary policy announcement at 12 midday UK time. Analysts and investors are expecting the central bank to keep policy unchanged, with interest rates at 0.75%. There will be no press conference following the announcement, limiting the impact that the meeting will have.
Recent data hasn’t been strong. The PMI readings for both the manufacturing sector and the dominant service sector printed below expectations and contraction territory. Unemployment data was more encouraging, with unemployment slipping to 3.8%, its lowest level since 1975. However, wage growth also slowed. Inflation was steady. Should wage growth slow further inflation could slip, leaving the Bank of England little choice but to cut interest rates early next year.
Dollar Stays Focused On Data
The US dollar advanced in the previous session as investors cheered a week of better than forecast data. On Tuesday housing data impressed as did manufacturing production numbers. Data showed that US manufacturing output increased 1.1% month on month in November, a significant improvement on the -0.7% decline experienced in October. The data indicates that the US manufacturing slump is rebounding from its recent slump.
With a lull in US — China trade headlines, investors will remain focused on the US economic calendar. Today sees the release of the US jobless claims and existing homes sales. The dollar is not expected to react to the fallout from Trump’s impeachment trial.
| 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. |
