The Pound Sterling to US Dollar (GBP/USD) exchange rate weakened by 0.54% on Thursday afternoon due to the release of better than forecast US pending home sales data and a softer-than-hoped for UK GDP second estimate report.
The Pound Sterling to US Dollar (GBP/USD) exchange rate touched a session low of 1.5260
Sterling softened earlier in the session against a number of major peers after data released by the London based Office for National Statistics (ONS) confirmed that the UK economy expanded by just 0.3% in the first three months of the year. The report disappointed economists who had been forecasting for an upward revision to the figures.
‘The expenditure breakdown showed a large negative contribution from net trade (0.9%), reflecting strong import growth in oil and transport equipment. Household consumption increased by 0.5%, down from 0.6% in Q4. A ‘silver lining’ in the breakdown was a 1.75 rise in business investment, more than reversing a drop in Q4. Overall Q1 GDP growth in the UK was relatively soft. While some part of that represents data noise, such as in construction. The impression was that there was also a deceleration in activity growth. Going forward we would expect some strengthening in performance, with the service sector regaining some traction. But indicators will be watched closely in coming months as the degree of any underlying slowing is assessed,’ said economists from UBS.
US Pending Home Sales Climb To 9-Year High
As the session progressed, the Pound softened further against the US Dollar as the American currency found support from the release of strong pending home sales data and a jobless claims report, which suggests that the US labour market is continuing to strengthen.
According to the National Association of Realtors (NAR), the index of pending home sales jumped 3.4% on a monthly basis in April. The rise was beat forecasts for a figure of 0.9% and beat the previous month’s revised figure of 1.2%. On an annual basis sales surged to 14%, up from the preceding figure of 11.1% and far stronger than expectations for 7.02%.
The strong data is likely a result of easier credit availability and low borrowing costs.
‘Realtors are saying foot traffic remains elevated this spring despite limited and in some cases severe inventory shortages in many metro areas. Homeowners looking to sell this spring appear to be in the driver’s seat,’ said NAR chief economist Lawrence Yun.
The US Dollar could make further gains on Friday if a second estimate of US GDP is revised higher. Also of interest will be Chicago PMI and Michigan consumer sentiment data.