Weekly US Dollar to Pound Exchange Rate Review

December 21, 2014 - Written by Toni Johnson

STORY LINK Weekly US Dollar to Pound Exchange Rate Review

At the start of the week, the US Dollar softened against the Japanese Yen and other major peers as steep declines in Japanese equities markets and tumbling oil prices increased demand for the safe haven Asian currency. Also weighing on the ‘Greenback’ was increased risk aversion caused by the week’s upcoming Federal Reserve policy meeting.

On Tuesday, the US Dollar exchange rate softened as demand for the Japanese Yen continued to increase on rising concerns over the health of the global economy and falling oil prices. Mixed data released in the previous session also dragged the currency lower. Industrial and manufacturing production data came in positively but those figures were countered by the New York Empire State Manufacturing Index, which showed that production fell steeply in December.

Midweek, the US Dollar advanced against most of its major peers as economists looked ahead to the Federal Reserve’s interest rate decision. The currency softened against the Pound and a number of emerging market and commodity based currencies as the Federal Reserve delivered a relatively dovish policy statement. At the bank’s post policy meeting press conference Fed Chair Janet Yellen said that the Fed was unlikely to raise rates for the “next couple of meetings” indicating that a move would occur in April at the earliest. The ‘Greenback’ advanced against the Euro and Japanese Yen however, as the suggestion of a rate hike further highlighted the diverging economic policies of the USA, Eurozone and Japan.

On Thursday, the US Dollar strengthened against several major peers as continuing and initial jobless claims data showed that the labour market in the world’s largest economy continued to strengthen. As the session progressed, the currency then gave up some of its earlier gains after a Philadelphia manufacturing index came in below economist forecasts. The index cooled off in December, coming in at 24.5. Expectations were for the index to come in at 26.0, down slightly from last month’s strong figure of a 40.8 reading.
The Pound meanwhile strengthened strongly as data showed that retail sales growth increased by their best level in ten years thanks to the Black Friday sales.

On Friday, the US Dollar softened against the Pound and other major peers due to the publication of mixed data in the previous session. Initial and continuing jobless claims data came in better-than-forecast but that positive report was countered by weaker than forecast Markit compiled PMI and Philadelphia Fed Manufacturing Index reports.

The currency markets are likely to be very quiet in the week ahead, as most traders and markets will be closed for the Christmas Holidays.

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