Pound Dives Versus Australian Dollar Ahead of BoE Rate Decision
  • BoE Governor Andrew Bailey considering negative interest rates
  • UK PMI’s to show contraction slowing
  • Safe haven dollar in demand as US – Sino tensions escalate
  • 07:15 UTC, GBP/USD was -0.34% at US$1.2197 >> Real time exchange rates

The Pound is on a two-day losing streak, reversing from high of US$1.2297 on Tuesday.

The Pound versus US Dollar exchange rate settled on Wednesday -0.1% at US$1.2241 after the Bank of England’s Governor praised negative interest rates.

At 07:00 UTC, GBP/USD is extending losses, trading -0.34% at US$1.2197 ahead of UK purchasing managers index data and US Initial jobless claims.

The BoE Governor Andrew Bailey’s U -turn on negative interest rates in keeping the Pound under pressure. The comments from Andrew Bailey came following data which revealed that UK inflation dropped to 0.8% year on year in April. Negative interest rates makes it expensive for banks to hold cash, encouraging them to lend more to businesses. A useful tool during the coronavirus crisis but one that is also dragging sterling lower.

Investors will look towards the Purchasing Managers Index (PMI) for both the service and manufacturing sectors, due for release today. Analysts are expecting to see an improvement from April’s worst ever prints. However, given that the lockdown in Britain has so far only eased very slightly in May, activity is expected to have only increased very slightly.

Analysts are forecasting the service sector PMI to increase to 25 in May, up from 13.4 in April. Manufacturing activity is expected to have increased to 36, up from 32.6. The level 50 separates expansion from contraction. A weak reading could pull the Pound lower.

The US Dollar is trending higher on Thursday as investors seek out its safe haven properties. Risk sentiment has taken a hit as tensions between US and China escalate. President Trump ramped up his attack on China by accusing Beijing of a massive disinformation campaign and allowing coronavirus to spread across the globe. The White House also released a 20-page report to Congress criticising China’s economic and ministry policies.

Looking ahead investors will focus on US initial jobless claims data. Analysts are expecting 2.4 million Americans to have filed for unemployment benefits. This will be the lowest since the lockdown escalation began. It would also take the total to 39 million American, or 23.9% of the workforce. Analysts are still not expecting to see an indication of rehiring reducing unemployment with continuing jobless claims expected to increase again.

Currencylive.com is a news site only and not a currency trading platform.
Currencylive.com is a site operated by TransferWise Inc. ("We", "Us"), a Delaware Corporation. We do not guarantee that the website will operate in an uninterrupted or error-free manner or is free of viruses or other harmful components. The content on our site is provided for general information only and is not intended as an exhaustive treatment of its subject. We expressly disclaim any contractual or fiduciary relationship with you on the basis of the content of our site, any you may not rely thereon for any purpose. You should consult with qualified professionals or specialists before taking, or refraining from, any action on the basis of the content on our site. Although we make reasonable efforts to update the information on our site, we make no representations, warranties or guarantees, whether express or implied, that the content on our site is accurate, complete or up to date, and DISCLAIM ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Some of the content posted on this site has been commissioned by Us, but is the work of independent contractors. These contractors are not employees, workers, agents or partners of TransferWise and they do not hold themselves out as one. The information and content posted by these independent contractors have not been verified or approved by Us. The views expressed by these independent contractors on currencylive.com do not represent our views.