The cost of buying US dollars with the pound has generally been getting more and more expensive over the last 6 weeks from the highs of nearly 1.34 at the interbank level down to 1.2850. At the start of the week rates were near their lowest over the last 2 months, a 4% drop. On Tuesday GBP/USD interbank rates climbed by over a cent and importantly broke a negative trend line which has been in place for 6 weeks.
|Currency Pair||% Change (Month)||Difference on £200,000|
US economic health has been very strong and the United States looks likely to be the fastest growing G7 economy with growth expected to be 2.4% this year. Last year, when the US-China trade war was at its peak, growth started to wane which prompted the Federal Reserve (FED) to reduce its expectations on interest rate hikes. It seems that the US economy is growing within expectation, meaning that it is not growing too fast resulting in interest rate hikes, or to slow resulting in interest rate hikes.
Yesterday saw the release of Manufacturing data which came in as expected along with the latest Fed update. The Fed left interest rates unchanged at 2.25%, even after President Trump tweeted on Tuesday that rates should be dropped by 1%. The Fed continues to show its official independence from Government and went on to suggest that the labour markets remains strong.
Today we have US factory orders being released which is expected to show further expansion, probably resulting in USD strength making it more expensive to buy. Friday however is expected to be the largest economic release with Nonfarm payroll data, manufacturing data and unemployment data from the world's largest economy. Overall unemployment is expected to stay steady at 3.8%, widely considered as 'full employment'.
Manufacturing is expected to confirm a strong expansion but Nonfarm payroll is expected to show 180k jobs created, down from 196k last month. Traditionally it is the Nonfarm payroll data which has the largest impact on market value and is the one to watch if you have exposure to the USD for the remainder of the month.
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