The pound US dollar exchange rate is holding steady in early trade on Thursday after surging 0.7% in the previous session. At the time of writing GBP/USD exchange rate is trading US$1.3135, slightly off Wednesday’s high of US$1.3153.
The pound received a boost in the previous session after the House of Lords gave its final seal to Brexit and following upbeat data from the Confederation of British Industry (CBI). The CBI revealed that optimism in British factories was at the highest level in six years in January, adding to signs that the UK economy received a post-election boost.
The stronger than expected data came following encouraging labour market data earlier in the week. All in all, this week’s upbeat macro data has meant that pound investors are scaling back their expectations of a rate cut by the Bank of England next week. Prior to the CBI release, sterling investors had been pricing in a 70% probability of the BoE easing monetary policy on 30th January. This has now been reduced to 50%. As rate cut expectations eased, the pound moved higher.
Today there is no high impacting UK macro-economic data for investors to watch for. Instead sterling investors are expected to look ahead to Friday’s PMI releases for further clues over the health of the UK economy.
Dollar Flat After Trump Dominates At Davos
The US dollar was on the back foot in the previous session as investors weighed up Trump’s comments in Davos, the start of his impeachment trial and better than expected existing home sales data.
On the second day of the World Economic Forum in Davos Switzerland, President Trump dominated proceedings once again, attacking political opponents, calling his impeachment trial a hoax and stating his intention to agree a trade deal with the European Union before the US presidential elections in November.
With no high impacting US data on the economic calendar, investors focused on mid-tier releases and more specifically existing home sales data. US homes sales jumped to their highest level in almost two years, as low mortgage interest rates have helped the housing market spark back into life. The report also showed that home building raced to a 13-year high. The data is the latest piece of evidence which supports the view that the US economy is on a solid footing.
Today concerns over coronavirus have returned after Chinese authorities have shut down access to and from Wuhan, the epicentre of the deadly virus. This news comes ahead of Chinese New Year. Risk sentiment has taken a hit with stocks markets across Asia falling. The safe haven dollar could get a boost from reduced risk appetite.
| 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. |