The sterling vs US dollar interbank exchange rate gained this week, to a seven-month high, its strongest since May 6th 2019. In part, this is because the world’s money managers are increasingly pencilling in the probability that next week’s UK election will deliver a decisive result.
However, turning to America, the so-called “greenback” has weakened, because US economic data this week largely disappointed.
For example, ISM’s closely-watched manufacturing survey fell to 48.1 in November, below forecasts for 49.2, October’s figure of 48.3, as well as the 50.0 point that separates growth from contraction.
Meanwhile, ISM’s non-manufacturing survey for last month fell by minus 0.8 points from October, to 53.9, pointing to slowing activity.
In addition, ADP’s Employment Change survey for November revealed that the USA has created only 67,000 new jobs, well below hopes for 140,000 fresh positions, and October’s 121,000 new roles. So these disappointing data have dragged down the US dollar.
Moreover, another reason why the pound to US dollar interbank exchange rate hit this seven-month high this week is because US President Donald Trump was ambiguous about whether he’ll sign the US-China “first phase” trade pact.
Although it’s thought that the deal has already been negotiated, Mr. Trump this week said that it might be better to wait until after the US’s Presidential elections in November 2020.
However, a Bloomberg report then suggested to the contrary that the USA and China will sign their trade deal soon. So markets aren’t clear if the trade pact will go ahead or not, thereby weakening the US economy and its dollar, as one of the main participants in the trade conflict.
Turning to the foreseeable future, today the USA’s closely-watched Non-Farm Payroll (NFP) for November will be released, telling us how many jobs the USA created in non-agricultural sectors.
Historically, the world’s money managers pay close attention to the NFP, as it’s the key measure of strength in the world’s largest economy’s job market, so this may impact the US dollar.
In addition, what with US economic data this week disappointing, the Federal Reserve is being increasingly tipped to cut interest rates next year, below their current 1.5%-1.75%, which may affect the greenback too.
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