USD weaker as investors unimpressed by strong US data

Strong US data wasn’t enough to bolster the US Dollar yesterday. Thursday brought us the strongest US consumer price inflation in more than 12 years and fresh jobless claims, which dropped to the lowest level in 15 months but the markets don’t believe that is enough to force the hand of the Federal Reserve. US interest rates and monetary policy look set to remain ‘accommodative’ as the Fed puts it, for quite a while. That prompted some USD selling and saw gold push above $1,900 an ounce; sure sign investors are still risk-averse but don’t trust the USD to hold its value.

The GBPUSD rate starts the day around $1.4175, having gained a cent since the start of Thursday. The Sterling – Euro rate has displayed a similarly positive rise. Part of this will be to do with the BOE’s Andy Haldane suggesting the solid recovery in the UK economy may prompt the BOE to start turning off the stimulus taps. As with any supply and demand situation, if the BOE restricts the supply of cheap cash, the value goes up. Hence, Sterling is stronger across the board this morning.

UK GDP surges and Sterling gains ground

We had UK GDP data this morning as well. Unsurprisingly, April 2021 saw much more activity than the locked-down April 2020; 27.6% more in fact and that is a record. There was a similarly strong recovery in manufacturing and industrial production, although these were marginally below the market forecasts. However, construction output was up 77.9% on the year. Overall, the three-month rise in GDP to April was 1.5%. When you consider the turmoil of the last 12 months, that is pretty good news.

The GBPEUR rate is up as well; pushing 1.1650 again but, once again, failing to make further headway. This rate is susceptible to comments relating to sausages and Northern Ireland, so watch your backs.

AUD boosted by RBA talk of earlier rate hikes

One GBP-based exchange rate that hasn’t fared so well is the GBPAUD rate. The Australian Dollar gained seven-tenths of a cent overnight, pushing GBPAUD down to 1.8230 this morning after the Reserve Bank of Australia suggested they will be looking to tighten monetary policy sooner than previously thought. If Sterling wasn’t having such a good day, that move would have been greater. The Australian Dollar – US Dollar rate is up half a cent at 0.7775.

This afternoon is light on data but the university of Michigan consumer confidence survey is always interesting. We expect that to show growing confidence and that should strengthen the US Dollar somewhat.

The G7 summit in Cornwall gets underway today. Now that the US President’s 17 car motorcade has found sufficient parking spaces and enough coins for the meters. I do hope they haven’t left the beast on a launch ramp. It’s always so embarrassing when the tide comes in and drowns errant parkers.

And then it is the weekend. I hope yours is a good one.

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