In a quiet session on Martin Luther King public holiday, the pound edged slightly higher versus the US dollar. The pound US dollar exchange rate closed Monday just 0.02% up, above the key psychological US$1.30 handle. The pair is edging higher in early trade on Tuesday as investors look towards President Trump’s impeachment trial and UK wage data.
The pound managed to brush off Brexit fears in the previous session, to close on the front foot after the International Monetary Fund (IMF) said that the UK economy would grow at a rate of 1.4% this year and 1.5% next year, should the UK manage to avoid a no deal Brexit with the EU. This would be an improvement on 2019’s anaemic growth rate of 1.3%. The news was welcomed by investors after recent UK macro data has been particularly poor.
The latest GDP data sowed that the British economy unexpectedly contracted in November, whilst December inflation data showed that consumer prices had hit a three-year low. Retail sales in December were also dismal, showing that not Christmas shopping spree materialised.
Today investors will look towards UK wage growth data. City analysts are expecting wage growth to have slowed in November, boosting the case for a rate cut by the Bank of England potentially as soon as 30th January.
Trump & Macron Agree Tariff Truce
The US dollar held its ground on Monday, after last week’s slew of data showed that the US economy is holding up well. Volumes and volatility were low in the previous session owing to an absence of influential data and the Martin Luther King public holiday.
The dollar slipped following news that President Trump and French President Emmanuel Macron agreed not to impose tariffs in their digital tax dispute until at least the end of 2020. The easing of tensions between the two sides, pulled on the safe haven dollar.
Today the US economic calendar remains light. As result, US President Trump’s impeachment trial in the upper house could attract investor attention. However, the trial is not expected to have a big impact on the dollar, given that the Senate is controlled by the Republicans.
|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.