US Dollar (USD) Gains on Pound (GBP), Euro (EUR) as Manufacturing PMI Climbs

Modified: Sunday, 22 February 2015 22:04 BST - Written by John Cameron

STORY LINK US Dollar (USD) Gains on Pound (GBP), Euro (EUR) as Manufacturing PMI Climbs

The US Dollar was trading in a stronger position against both the Pound and Euro on Friday. The US Dollar to Pound Sterling currency pair gained by 0.4% while the ‘Greenback’ to Euro exchange rate advanced 0.7% over the course of European trading. Demand for the US Dollar was initially stoked by ‘Grexit’ fears as concerns that Greece could leave the Eurozone drove investors towards safe-haven assets. Although the Hellenic nation submitted a request for a six-month financial assistance programme to its creditors, the concept outlined was rejected by Germany on Thursday. This proof of the disparity between what Greece are hoping to achieve and what the Eurozone’s largest economy is willing to allow spooked investors and drove higher-risk currencies broadly lower.

Bets that the US Federal Reserve will increase interest rates up to six months earlier than the Bank of England also supported the US Dollar’s uptrend against the Pound, as did the US Markit Manufacturing PMI printing above expected levels. The measure of the US manufacturing sector had been forecast to dip from 53.9 in January to 53.6 to February, but it actually jumped to 54.3 – pushing further above the 50 mark separating growth from contraction.

Markit economist Chris Williamson said of the figure; Factory output growth ticked higher for a second successive month in February, suggesting the goods-producing sector is on course to make a robust contribution to the economy in the first quarter. The production upturn occurred despite widespread delivery delays caused by heavy snowfall and port strikes, which may have also been a factor behind the near-stagnation of exports, suggesting the underlying picture may have been one of slightly stronger growth.’

Before the close of trading the US Dollar was trending in the region of 0.6500 against the Pound and trading in the region of 0.8801 against the Euro. Further US Dollar volatility can be expected to occur next week given that the US is set to publish its Consumer Price Index. A sharp slowing in inflation would add to the argument in favour of the Federal Reserve delaying interest rate hikes and could put the US Dollar under pressure. Geopolitical conditions, developments in the Eurozone and commodity price movements will also be of interest.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Dollar Pound Forecasts