Pound To US Dollar Exchange Rate Under Pressure Following Disappointing US Durable Goods Reading

Published: Thursday, 29 March 2012 09:00 BST - Written by Tim Boyer

STORY LINK Pound To US Dollar Exchange Rate Under Pressure Following Disappointing US Durable Goods Reading

Weaker than expected US Durable Goods data, released yesterday afternoon in the States, saw global share indices lose ground and the US Dollar stage a brief rally. The numbers showed that orders of durable goods in the US rose by 2.2% in February, following January’s sharp drop-off of 3.6%. Analysts had been expecting a stronger bounce-back, with a reading of 3.0% having been mooted.

The Durable Goods Orders data – which measures the number of orders for products built to last over 36 months – is considered a strong indicator of confidence in an economy, as it shows that businesses and consumers are planning ahead.

Meanwhile, yesterday’s session also saw a marked drop-off in wholesale oil prices, with the price of a barrel of Brent Crude falling by over $1.50 to settle under $125. The move was elicited by market rumours which suggested that several major nations are considering releasing oil reserves into the market. Low oil prices are thought to benefit the resource-hungry US economy more than any other nation, as America is the world’s largest net importer of crude. If the downward shift in oil prices is maintained, then investor confidence in the States may further improve, causing a move out of safe-haven assets, which would hurt the US Dollar.

Elsewhere, there was bad news for the Pound yesterday morning, with the release of data which showed that the UK economy had contracted by 0.3% in the final three months of 2011. The two previous government estimates had put the figure at -0.2%, so the data triggered a move against Sterling in the early part of the day. Sterling continues to trade lower against the euro in early trading today, but has recovered against the Greenback, sending the GBP USD exchange rate back into the 1.5900s. The British currency’s recent strong performance against the Australian and New Zealand Dollars continues, as institutional investors remain wary of committing to assets with a high yield/high risk tariff.

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