The Euro to US Dollar (EUR/USD) exchange rate strengthened by more than 0.60% on Thursday to advance to its highest level in 3-months as concerns grow over the strength of the US economy. The Pound Sterling to US Dollar (GBP/USD) exchange rate surged to a 6-month high of 1.5789.
The Euro to US Dollar (EUR/USD) Exchange Rate Reached A Session High Of 1.1431
Worries are growing that the US economy will not show signs of spring a rebound as had been predicted. Wednesday saw the publication of a weaker-than-forecast retail sales report and data, which showed that the US suffered from a 10th consecutive month of falling import prices.
The reports were just the latest ones to disappoint and caused economists to raise their bets that the Federal Reserve will not hike interest rates anytime soon.
‘The economy needs to pick up steam for the Fed to be really satisfied that we’re leaving the weakness of the first quarter behind us. This puts a lot of pressure on next month’s number to be very strong to make up for the weakness in April,’ said Guy Berger, an economist from RBS Securities Inc.
The cause for the Euro’s surge higher was the support the currency was generating from a sustained rise in Eurozone government bond yields. Investors were also continuing to digest the previous sessions Eurozone data releases. Economic growth in the Eurozone now contrasts with the disappointing US growth seen in the first quarter.
‘The Euro is continuing to rebound, supported by the ongoing adjustment higher in Eurozone yields. This is in part supported by strengthening growth in the Eurozone and higher inflation expectations,” said Lee Hardman, a currency strategist at BTMU.
The Pound Sterling to US Dollar (GBP/USD) Exchange Rate Touched A Session High Of 1.5812
The Pound Sterling to US Dollar exchange rate strengthened to its best level in 6-months as the UK currency took advantage of the ‘Greenback’s’ weakness. Sterling meanwhile managed to regain lost ground caused by the Bank of England cutting its economic growth forecasts for the next three years. Investors were focusing on the more positive data, which showed that the UK’s unemployment rate slipped to 5.5% last month from the 5.6% in March. The nation’s jobless rate is now at its lowest level since September 2008.
Both the Euro and Pound Sterling could make further gains against the US Dollar if upcoming US jobless claims data comes in worse-than-forecast. Any poor data release will surely cause investors to raise their bets that a Fed rate hike will not occur this year.