The US dollar has continued to lose ground against its major currency counterparts of late, following a raft of negative data being released recently. Yesterday was no different, after Initial and Continuing Jobless Claims data showed a rise in the number of people filing for unemployment benefits, highlighting a continuing slowdown of the US jobs market. However, this slowdown wasn’t to the extent seen in February which helped to limit the US dollar’s losses.
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To add to this, the number of New Home sales also fell in January compared to December, and fell short of the expected figure. The US is currently experiencing a slowdown in its housing market mainly due to affordability, despite mortgage rates falling and house price inflation slowing too. It is expected that the housing market will remain sluggish throughout the first half of 2019.
Earlier this week Inflation figures were also released below expectation which is a key barometer to the health of the US economy. This gloomy outlook, combined with yesterday’s sterling strength from news that the UK would most likely not be going down the route of a No Deal Brexit, helped the interbank GBPUSD rate to remain firmly above 1.32 throughout the course of yesterday. It is worth noting that the interbank rate has only breached 1.33 for 3 very short periods so far this year.
This negative data all points towards a slowdown for the US economy and therefore will be difficult for the Federal Reserve (FED) to justify a hike in interest rates from the current rate of 2.5% at their next decision meeting on Wednesday at 6pm. Although it is widely expected that the FED’s decision will be to keep rates on hold, the minutes afterwards could provide some hints to the central bank’s future monetary policy plans, which will be keenly watched for by investors for any signs of positivity, or an improvement in sentiment.
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