Strong US Data Sends GBP USD Exchange Rate Lower Again

Published: Friday, 15 March 2013 18:00 BST - Written by John Cameron

STORY LINK Strong US Data Sends GBP USD Exchange Rate Lower Again

This afternoon’s session was marked by further positive data releases in the US. Manufacturing production data for last month showed that the combined output of America’s factories expanded by a healthy 0.8% last month, while US Industrial Production data, also for February, showed a gain of 0.7%, which was well ahead of analysts’ expectations. The numbers from America built on last Friday’s stellar Non-Farm Payrolls data which showed that almost 250,000 new jobs had been generated in the world’s leading economy in February.

US inflation data, released at the same time, revealed that the rate of price rises in the States has once again moved higher. February’s annualised US CPI inflation figure showed at 2.0% versus January’s 1.6% figure. The number will cause concerns amongst economists who feel that the US Federal Reserve’s persistence with its controversial Quantitative Easing programme is fuelling levels of domestic inflation. Today’s reading will increase their lobbying against the programme and surely makes it more likely that the Fed will begin scaling down their policy – an action which several policymakers called for at the last FOMC meeting.

This afternoon’s developments in the States saw the Pound to US Dollar exchange rate (currency : GBP USD) pullback from its intraday high of 1.5177 which it reached earlier. Any further hints that a winding-down of QE might be on the cards will be likely to trigger further downside for GBP USD. With Wednesday’s budgetary statement to Parliament from the UK Chancellor of the Exchequer George Osborne looming fast, there could be sustained selling pressure on Sterling during the early part of next week. This would serve to send the GBP USD exchange rate lower still.

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