The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending at 1.6856, with lows of 1.6830 and highs of 1.6864. Current movement is unchanged from today’s opening levels as demand for the US Dollar increases and UK factory output stumbles.
Yesterday was a troubling day for Sterling. Year-on-year industrial production was down from the forecast figure of 1.5% to 1.2%. Also, year-on-year manufacturing production was down from a forecast figure of 2.1% to 1.9%.
On the other hand, demand for the Dollar was slightly accelerated yesterday with the US having seen positive results from US Trade Balance data. Forecasted to rise to -44.9 billion from May’s figure of -44.7 billion, traders were pleased to see a drop in the actual data to -41.5 billion.
Today has seen little change in the strength of the Pound. This is mainly because the Bank of England’s (BoE) interest rate decision was consistent with forecasts.
The BoE Asset Purchase Target for August remained at 375 billion, and the BoE rate decision saw the benchmark rate unchanged at 0.50%. The bank rate has remained consistent since March 2009.
The Bank of England’s Monetary Policy Committee’s latest economic projections will appear in the forthcoming Inflation Report to be published at 10.30 am on Wednesday 13 August.
Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London stated; ‘Market reaction will all come in the following week when we get the release of the Inflation Report and then the minutes in the week after’.
Conversely the USD has continued its upward trend following the better-than-expected trade balance report. Today saw the release of the US Initial Jobless Claims statistics. Having posted a previous figure of 303,000 economists forecast a rise to 304,000.
The actual figure came in at 289,000, a surprise drop which has further strengthened the ‘Greenback’ against a plethora of currencies.
This unforeseen drop in jobless claims is likely to be a result of the retooling undertaken by manufacturers in preparation for new production. The monthly figure will have a greater impact compared to the volatility of the weekly report just posted.
Tomorrow will be important for British economic standing. Year-on-year construction output is forecast to come in at 4.7% in June. Total Trade Balance is forecast at -£2050 down from -£2418 posted in May.
The Trade Balance is one of the biggest components of the United Kingdom’s Balance of Payment, thus giving valuable insight into pressures on the value of the Pound. Also the Visible Trade Balance will be of importance because Britain’s economy is highly trade driven, so Visible Trade data can give critical insight into developments in the economy and into foreign exchange rates.
The forecast figure is -£8900 down from May’s posting of -£9204.
The US economy will be less affected by tomorrow’s proceedings with very little data to be released.
Looking forward, Tuesday of next week will see the release of the US Monthly Budget Statement which is forecast at -95 billion.
Wednesday of next week will be important for UK data releases. Jobless Claims and Average Weekly Earnings are ones to watch.