The US economy has received a boost after a strong rebound in manufacturing activity taking levels to a two year high. The Institute for Supply Management leapt to 55.3 showing expansion and up from 54.2 the previous month when it fell to its lowest level in two years. The report also pointed to an upbeat outlook with new orders, production and employment all rising. The data is most welcome for the dollar at a time when there are concerns that a slowdown is about to take place.

Currency Pair% Change in 1 monthDifference on £200,000
GBPUSD2.8%$7,380

The US Federal Reserve (Fed) has already signalled its intention to not raise interest rates again this year whilst downgrading its growth forecasts. It wasn’t that long ago when another two hikes for 2019 were expected. However not all the data was strong with Retail sales taking a fall into negative territory arriving at -0.4% for February. The numbers took an unexpected dip which highlights that the FED were probably correct to change tact. There is an awareness that the stimulus package that Trump injected in to the economy when he became President is now running out of steam at a time when uncertainties over the US China trade war are exacerbating the downturn. Higher interest rates as well as Brexit are also factors having a negative impact on the US dollar. This afternoon sees a raft of economic data across different sectors including durable goods orders, vehicle sales and capital goods orders which tackle heavy duty equipment used in the manufacturing process.

USD forecast - US dollar Receives Mixed Economic Signals

US China trade

Trade talks between the US and China continue after months of negotiations to try and find an agreement. It has been hoped that an agreement could be reached this week with a signing ceremony between leaders Donald Trump and president Xi Jinping expected later on in the month. In a sign of what would appear to be good relations it has been reported that China has offered to suspend tariffs it imposed last year on American cars as a gesture of good will. Head of International Affairs at the Chamber of Commerce Myron Brilliant said that the US and China are “in the end game with regards to a deal although there are sticking points that have to be addressed.” Any statements to confirm a deal would likely be seen as positive for US trade with a potential positive impact on the US dollar.

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