As covered in the previous two sections the pound has manged to make some solid gains across the board including vs the US dollar. Clearly the overriding factor has been the comments made by Macron that we may be close to organising a different arrangement with Europe concerning the backstop. News from the US may have also contributed to GBP gains as the US economy shows signs for concern.
According to Krishen Rangasamy, analyst at National Bank Financial, has claimed that although the jobs market in the US is strong it may not be as robust as previously expected.
She went on to say ‘just under 2 million net new jobs were created in the twelve months to March 2019, 20% lower than the previous estimate. The downgrade to the private sector job creation was slightly larger in percentage terms.’
This could put pressure on the Federal Reserve to consider cutting interest rates and historically when an economy cuts rates this will often result in weakness for that currency.
However, the Fed have stood firm against the pressure placed on them by a number of different comments made by US President Donald Trump who has claimed that the Fed should cut interest rates to allow the US economy to remain competitive and lower interest rates in order to weaken the value of the US dollar.
Previously, Trump has said on Twitter that ‘with almost no inflation, our Country is needlessly being forced to pay a MUCH higher interest rate than other countries only because of a very misguided Federal Reserve.’
Yesterday afternoon the US released some lower than expected US economic data in the form of both Services and Manufacturing data.
US Services came in at 50.9 which was lower than the estimate of 52.8 and Manufacturing came in at just 49.9 compared to the expectation of 50.5.
Later this afternoon, Fed Chair Jerome Powell will be speaking so any signs of any changes to monetary policy in the future could result in some movement for USD exchange rates. Therefore, may sure you pay close attention to this afternoon’s speech.
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