{"id":4306,"date":"2018-02-06T00:00:00","date_gmt":"2018-02-06T05:00:00","guid":{"rendered":"https:\/\/currencylive.com\/100340-gbp-usd-slowing-uk-economy\/"},"modified":"2018-02-06T00:00:00","modified_gmt":"2018-02-06T05:00:00","slug":"100340-gbp-usd-slowing-uk-economy","status":"publish","type":"post","link":"https:\/\/currencylive.com\/news\/100340-gbp-usd-slowing-uk-economy\/","title":{"rendered":"GBP\/USD: Pound Drops Below $1.40 vs Dollar Amidst Slowing UK Economy"},"content":{"rendered":"<p>The pound was among the worst performing currencies at the beginning of the week. Sterling fell back below US$1.40, undermined by soft UK data.<\/p>\n<table class=\"table table-bordered\">\n<thead>\n<tr>\n<th>What do these figures mean? <\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>\n<p> 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. <\/p>\n<p> For example, it could be written: <em>1 GBP = 1.28934 USD<\/em> <\/p>\n<p> <em>Here, \u00a31 is equivalent to approximately $1.29. This specifically measures the pound\u2019s worth against the dollar. If the US dollar amount increases in this pairing, it\u2019s positive for the pound.<\/em> <\/p>\n<p> Or, if you were looking at it the other way around: <em>1 USD = 0.77786 GBP<\/em> <\/p>\n<p> <em>In this example, $1 is equivalent to approximately \u00a30.78. This measures the US dollar\u2019s worth versus the British pound. If the sterling number gets larger, it\u2019s good news for the dollar.<\/em> <\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table class=\"table table-bordered\">\n<p>The pound tumbled throughout Monday, as investors reacted to weaker than forecast service sector pmi. The forward-looking service sector indicator dropped to 53 in January, from 54.2 in December. A figure above 50 indicates expansion in the sector, whilst below 50 indicates contraction. This is the weakest reading for the service sector data since September 2016, as consumers continue to reign in their spending. Household budgets have been under increasing pressure thanks to higher prices and lower wages in real terms.<\/p>\n<p>The surprisingly low reading is the third in a hattrick of weak pmi readings. The construction sector and the manufacturing sector disappointed market participants at the end of last week.<\/p>\n<table class=\"table table-bordered\">\n<thead>\n<tr>\n<th>Why does poor economic data drag on a country\u2019s currency? <\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Slowing economic indicators point to a slowing economy. Weak economies have weaker currencies because institutions look to reduce investments in countries where growth prospects are low and then transfer money to countries with higher growth prospects. These institutions sell out of their investment and the local currency, thus increasing supply of the currency and pushing down the money\u2019s worth. So, when a country or region has poor economic news, the value of the currency tends to fall. <\/td>\n<\/tr>\n<\/tbody>\n<\/table class=\"table table-bordered\">\n<p>Last week the pound had rallied, as comments from Bank of England Governor Mark Carney lead market participants to believe that the central bank could adopt a more hawkish approach to monetary policy. However, the soft numbers coming out of the UK recently are causing investors to doubt whether the UK economy is able to sustain higher interest rate levels, which is weighing on sentiment for the pound.<\/p>\n<p>With a light UK economic calendar today, investors will continue to focus on Thursday\u2019s Bank of England rate decision and quarterly inflation report. Brexit headlines could also create volatility in the pair.<\/p>\n<h2><a href=\"#us-economy-shows-robust-growth\" name=\"us-economy-shows-robust-growth\"><\/a>US Economy Shows Robust Growth<\/h2>\n<p>Confidence in the dollar has improved greatly since the strong US jobs numbers on Friday last week. It received a fresh boost in the previous session after figures showed that the US non-manufacturing pmi hit a 12 \u00bd year high. The economy is being buoyed by robust growth in new orders, which are fresh signs of a strong start to the year for US economy. The economy is showing impressive signs of growth, even before the effects Trump\u2019s $1.5 trillion tax cut package which only came into effect last month. This is causing investors to fear the US economy overheating, in which case the Fed would need to hike interest rates at a much faster rate than they had originally mapped out for the year.<\/p>\n<table class=\"table table-bordered\">\n<thead>\n<tr>\n<th>Why do raised interest rates boost a currency\u2019s value? <\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Interest rates are key to understanding exchange rate movements. Those who have large sums of money to invest want the highest return on their investments. Higher interest rate environments tend to offer higher yields. So, if the interest rate or at least the interest rate expectation of a country is relatively higher compared to another, then it attracts more foreign capital investment. Large corporations and investors need local currency to invest. More local currency used then boosts the demand of that currency, pushing the value higher. <\/td>\n<\/tr>\n<\/tbody>\n<\/table class=\"table table-bordered\">\n<table class=\"table table-bordered\">\n<tbody>\n<tr>\n<td>\n<p><small><em><br \/>\nThis publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Inc., Currency Live or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. Consult our <a href=\"https:\/\/currencylive.com\/risk-warning\/\">risk warning<\/a> page for more details.<\/em><\/small><\/p>\n<p><small><em>This article was initially published on TransferWise.com from the same author. The content at Currency Live is the sole opinion of the authors and in no way reflects the views of TransferWise Inc.<\/em><\/small><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The pound was among the worst performing currencies at the beginning of the week. Sterling fell back below US$1.40, undermined by soft UK data. 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 [&hellip;]<\/p>\n","protected":false},"author":163946597,"featured_media":4307,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1379,1381],"tags":[1394,1398],"class_list":["post-4306","post","type-post","status-publish","format-standard","has-post-thumbnail","category-gbp","category-usd","tag-gbp","tag-usd"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.0 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>GBP\/USD: Pound Drops Below $1.40 vs Dollar Amidst Slowing UK Economy - Currency Live<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/currencylive.com\/news\/100340-gbp-usd-slowing-uk-economy\/\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Fiona Cincotta\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100340-gbp-usd-slowing-uk-economy\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100340-gbp-usd-slowing-uk-economy\\\/\"},\"author\":{\"name\":\"Fiona Cincotta\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/#\\\/schema\\\/person\\\/8ef0fafb6c93f1204150bb907b42cfec\"},\"headline\":\"GBP\\\/USD: Pound Drops Below $1.40 vs Dollar Amidst Slowing UK Economy\",\"datePublished\":\"2018-02-06T05:00:00+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100340-gbp-usd-slowing-uk-economy\\\/\"},\"wordCount\":830,\"image\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100340-gbp-usd-slowing-uk-economy\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/currencylive.com\\\/news\\\/wp-content\\\/uploads\\\/2019\\\/08\\\/100340-gbp-usd-slowing-uk-economy.jpg\",\"keywords\":[\"gbp\",\"usd\"],\"articleSection\":[\"GBP\",\"USD\"],\"inLanguage\":\"en-US\",\"copyrightYear\":\"2018\",\"copyrightHolder\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/#organization\"}},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100340-gbp-usd-slowing-uk-economy\\\/\",\"url\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100340-gbp-usd-slowing-uk-economy\\\/\",\"name\":\"GBP\\\/USD: Pound Drops Below $1.40 vs Dollar Amidst Slowing UK Economy - 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