The pound gained after the release of strong wage and retail sales data, but despite this, the dollar rose more due to stronger US data shelving doubts about the previously negative assessment of the US economy.

Currency Pair% Change (Month)Difference on £200,000
GBPUSD1.7%$3,400
Powell’s pessimism to be brought into the spotlight

The main release in the week ahead which is heavy in data for the US dollar is Q1 Gross Domestic Product figures. This is the preliminary estimate for growth in Q1. Official estimates are for growth in the US to have risen to an annualised 1.8% compared to the previous quarter. This would be slower than the 2.2% previously. The risk is that the figure may be higher-than-expected, however this could start to dispel widespread notions the US economy is in decline and potentially revive the idea that the Federal Reserve (Fed) might raise interest rates in 2019. Such an outcome would be a massive boost for the dollar. US data could be characterised as being mixed to improving recently with GDP being a big deciding factor, which may seal the deal to whether the US economy is back on its feet.

The US China trade talks are still ongoing with news of China delaying and causing problems with data and red tape. The fear is the longer these talks go on with no seeming end, the more complaints and red lines become stronger, causing problems for both economies which may struggle to make sense of the outcome. Major parallels can be drawn from a recent scenario (Brexit) that is still ongoing and the economic impact and uncertainty. The next battleground of the trade war; the technology battle. Any continued long term trade war will have adverse effects for both currencies and the global economy

Data heavy week

The USD could be shifted this and thoughts that the resistance level of 1.30 could be broken. The Index Housing Price Index (today), Jobless claims (Thursday), Non-defense Capital Goods Orders (Thursday) and finally Michigan Consumer Sentiment as well as the GDP figures discussed on Friday. As there is a vast array of news and data releases this week, I would strongly suggest getting in touch with your account manager here at FCD to discuss how to best work around these releases.

Brexit Challenger

It seems Labour must promise another Brexit referendum to counter the electoral challenge posed by Nigel Farage and his new Brexit party as they can be ignored no longer. This new challenger to UK politics could through a major spanner in the works for the Theresa May and the opposition to cement a Brexit plan for the upcoming months. Coupled with the European elections in the forefront of the parliament’s mind, there are plenty of obstacles that face Brexit and indeed the pound as a currency.

As a result, cable suffered a bearish close below the interbank rate of 1.2987. Sterling's inability to see strong UK data, coupled with continued lack of Brexit clarity over the Easter break has led to a struggling pound.

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