Dollar Exchange Rate Forecast - Pound to US Dollar Pushes Back Ahead of UK Retail

August 10, 2014 - Written by Frank Davies

STORY LINK Dollar Exchange Rate Forecast - Pound to US Dollar Pushes Back Ahead of UK Retail

Curreny News UK - The US Dollar (USD) exchange rate complex remained supported against several major peers at the start of the week after jobs data released last week was deemed supportive by the markets despite missing expectations. The ‘Greenback’ made further gains in the afternoon on the latest factory orders and ISM Non-Manufacturing data, which added to, signs that the world’s largest economy is continuing to strengthen.

The US Dollar strengthened against all of its major peers on Tuesday following the release of the stronger-than-forecast service sector data. Also lending support to the currency was a report, which showed that new orders soared to its highest reading since August 2005. The employment index also advanced for a fifth consecutive month.

Currency News UK: Dollar to Pound Exchange Rate Outlook (USD GBP) Holds Steady, but Could See Further Short-term Losses - The USD found further support against most of its major peers last Wednesday after Trade Balance data came in better than forecast. The world’s largest economy saw its trade gap shrink to its narrowest point in five-months. The currency also found support from demand for safe haven currencies as tensions between Russia and Ukraine spooked the markets.

On Thursday, the US Dollar made gains against the Pound and advanced to a nine-month high following the publication of better than expected Jobless Claims data. The U.S. Department of Labour reported earlier that the number of individuals filing for initial jobless benefits in the week ending August 2 fell by 14,000 to 289,000 from the previous weeks total of 303,000. Analysts had been expecting claims to rise by 2,000.

The Pound gained some ground against the US Dollar at the start of the week, as investors were happy with a solid UK construction data report. The nation’s construction PMI eased slightly to 62.4 last month but was better than the reading for 62.0 expected by economists. Despite the slowdown, the pace of growth in the sector remained at its fastest speed since 2007. Tuesday’s session saw Sterling push ahead as economists awaited the release of the latest UK Markit Services PMI report.

Midweek Sterling eased against the US Dollar after the US currency found support from the release of strong service sector and ISM data. Earlier in Tuesday’s session, the Pound had made gains of its own after data showed that the UK’s dominant service sector continued to do well. Markit Economics reported that its Markit/CIPS Services Purchasing Managers Index rose to 59.1 in July from 57.7 in June, beating expectations for a 57.9 reading.

The Pound declined further against the US Dollar on Wednesday following the release of softer-than-forecast Manufacturing and Industrial Production data. Putting more pressure on the currency was a report, which showed that Store Prices dropped by an annual rate of 1.9%, the largest decline recorded since 2006. The disappointing data caused investors to rethink their estimates as to when the Bank of England will choose to tighten monetary policy.

The Pound fell sharply against the Greenback as the week as concerns over the possible breakup of the United Kingdom weighed heavily. According to the National Institute of Economic and Social Research, Scotland should create its own currency if the Scottish people vote for independence. Also weighing on the currency were concerns that the UK military could go back into Iraq after US President Barrack Obama authorized airstrikes against Islamist Jihadists who have conquered large swathes of the Middle East.

Next week promises to see the markets dominated by geopolitical concerns, as US airstrikes against Islamic State fighters is likely to escalate. Investors are also keeping an eye on the situation in Ukraine as worries build that Russia could invade under the pretext of a humanitarian mission.

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