The pound initially pushed higher versus the US dollar in early trade on Monday, before slipping lower. The pound US dollar exchange rate hit a peak of US$1.3104, before closing the session 0.2% lower at US$1.3030, amid a strong risk off atmosphere.
Concerns over the speed of the spread of China’s coronavirus has resulted in investors moving out of riskier assets and putting their money into safe havens such as the US dollar.
The pound is moving lower again versus the US dollar in early trade on Tuesday.
The pound found some support in the previous session from data which showed that the outlook for the UK economy improved over the last three months, thanks in part to a decisive win by the Conservatives in the December elections. According to EY ITEM Club’s Winter Forecast, GDP growth of 1.2% in 2020 is forecast and 1.7% growth in 2021, compared to 1% and 1.5% predicted in the last quarterly forecast.
Analysts are expecting the UK economy to show signs of improvement in the early moths of 2020. However, Brexit uncertainty could drag on the economy and the pound again as the year progresses due to uncertainty surrounding the EU – UK future relationship.
Today the pound is under pressure, weighed down once again by fears of a hard Brexit. Investors will look towards the Confederation of British Industry (CBI) distributive sales report. Analysts are expecting a tick higher in in the January figures.
Will US Durable Goods Data Boost Dollar?
The dollar was in favour on Monday as investors grew increasingly concerned over the spread of the deadly coronavirus and its potential impact on global growth and trade. As fears escalated investor sought out safe havens such as the US dollar, Japanese Yen and Swiss Franc. There is still a lot of uncertainty over how much further the coronavirus will spread. These fears will continue driving movement in the forex markets.
Today the dollar could receive further support from the release of US durable goods orders. Analysts are expecting durable goods orders to increase 0.9% month on month in December, up from a -2.1% decline in November. Durable goods orders are closely watched data point by investors, as they give a good indication of confidence levels in the economy. A strong reading could lift 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.