Pound To Dollar Exchange Rate (GBP USD) Steady despite Positive US Data

Modified: Tuesday, 25 June 2013 14:28 BST - Written by John Cameron

STORY LINK Pound To Dollar Exchange Rate (GBP USD) Steady despite Positive US Data

This afternoon’s US Durable Goods Orders data for May convincingly beat expectations to print at 3.6% versus analysts’ expectations of a 3.0% showing. The news raised one question above all others – what is a Durable Goods Order? The simple answer is that it is a product purchased by a company / individual which would ordinarily be expected to last at least three years.

The figure is always closely-watched by investors as a gauge of confidence levels in an economy, the thinking behind this being that organisations and households only make large ticket purchases when optimism is high in the economy at large. Conversely, when pessimism looms large over an economy, ‘big ticket’ purchases are postponed as market participants sit on their hands and take a ‘wait and see’ approach.

The encouraging US release has pointedly failed to provide the US Dollar with a boost this afternoon. The Pound to US Dollar exchange rate (currency GBP USD) has remained entrenched in the 1.5400s all day, suggesting that the Greenback’s relationship with risk may once again be on the turn. Last Wednesday’s pre-announcement by the Federal Reserve that it is set to begin reducing the $85bn per month worth of asset purchases which it is making now appears to be factored-in to pricing in the currency market. In the months leading up to this revelation relatively strong US data releases served to strengthen the Buck as analysts factored-in a higher percentage chance that they would lead to a reduction in the Fed’s Quantitative Easing programme. Now that a tapering of QE is considered a given, it would appear likely that the USD’s erstwhile relationship with risk will resume, meaning that strong data sets from any major global economy will increase investors’ collective appetite for risk, weakening the US tender. If US tier one data releases continue to beat expectations, then the Pound to US Dollar exchange rate may retrace back up towards the 1.6000 level once again.

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