The pound slipped through $1.31 versus the US dollar on Thursday, striking a low of US$1.3014. The pound US dollar exchange rate lift towards the close, ending the session 0.2% lower at US$1.3064. The pound is edging higher in early trade on Friday.
Sterling moved southwards in the previous session after pound investors reacted to a more dovish sounding Bank of England Governor Mark Carney. Mark Carney gave the strongest hint yet that the central bank could soon cut interest rates in order to shore up the UK economy. In one of his final speeches as BoE Governor, Mark Carney said that the UK economy had been sluggish, and inflation continued below the central bank’s 2% target. The pound slumped sharply on the prospect of the BoE adopting a loser monetary policy.
The upcoming EU – UK trade negotiations also weighed on demand for the pound in the previous session. Boris Johnson continues to stand firm insisting that there will be no extension to the transition period, beyond the end of this year. Investors are growing nervous that this is insufficient time to negotiate and the UK will leave at the EU at end of the year on WTO trade rules. This would be a significant step down from the current arrangement.
Today the UK economic calendar is light. BoE policy maker Tenreyo will give a speech in London covering the outlook for the labour market which could attract some attention.
Can Dollar Extend Gains?
The US dollar advanced as concerns over escalating troubles in the Mideast eased. US economic data was once again supportive. Initial jobless claims rose at a weekly 214,000, ahead of analysts’ forecasts, providing further evidence that the US economy is holding up well.
Today investors will be looking towards the non-farm payroll: The US Department of Labour’s employment report. Analysts are expecting 164,000 jobs to have been created in December, easing back from 226,000 created in November. The unemployment rate is expected to remain unchanged at 3.5%. Hourly earnings are expected to gain 0.3% following November’s 0.2% lift. Annually earnings will remain stable at 3.1%. The Fed watch the NFPs closely. A strong reading could boost the dollar. This is because the Fed is more likely to raise interest rates when the labour market is strong.
| 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. |
