Pound US Dollar Muted Despite UK Economy 'Turning A Corner'

view original post

At the time of writing GBP/USD was trading at around $1.2531, virtually unchanged from Monday’s opening rate.

The Pound (GBP) held steady against the majority of its peers on Monday despite the absence of UK macroeconomic data releases.

Sterling sentiment was buoyed however by some positive economic speculation from accounting and business advisory company, BDO.

The report suggested that the UK economy is ‘turning a corner’, as UK business output rose to a two-year high in April.

Kaley Crossthwaite, partner at BDO, commented: ‘It’s heartening to see a turning point begin to materialise for the economy, with the services sector driving the bounce back so far from last year’s technical recession. But businesses

across the board need more certainty from the government and we urge them to provide a clear, stable and long-term tax roadmap as soon as they’re able to, alongside much needed reforms to the apprenticeship levy.’

The report cited increased consumer spending as the catalyst for the service-led rebound, and served to moderately lift GBP exchange rates in the aftermath of the release.

US Dollar (USD) Flat amid Data Absence

The US Dollar (USD) struggled to attract investor attention on Monday as US economic data releases were few and far between, which left the ‘Greenback’ struggling to find a clear trajectory.

As a primary safe-haven currency, the US Dollar is often buoyed by upbeat trading conditions.

However, as markets remained mostly mixed on Monday, the safe-haven US currency was left trading in a narrow range against the majority of its peers throughout the European session.

GBP/USD Forecast: Inflow of US data to Infuse Volatility into the US Dollar?

Looking ahead, the primary catalyst of movement for the Pound US Dollar exchange rate this week will likely be several data releases from the US.

On Tuesday, the US will release its latest PPI data for April which markets expect to remain unchanged at 0.2%. Any deviation from the forecasted reading could see USD exchange rates slide.

Heading into Wednesday, both headline and core inflation data for April is scheduled for release and is forecast to show that both sets of data are cooling closer towards the Federal Reserve’s 2% target, and could undermine the ‘Greenback’ should the data print as expected.

Also on Wednesday, the US will release its latest retail sales figures. As the data is expected to dip for this reading, could this be enough to hobble USD exchange rates in mid -week trade?

Turning to the Pound, the central data release this week will come in the form of the UK’s latest labour data.

Scheduled for release on Tuesday, the UK’s latest unemployment data is forecast to show that unemployment held at a six-month high of 4.2% in March.

Also set for Tuesday, UK average earnings (excluding bonuses) are also expected to decrease in March.

Should the data print as expected and show signs of a slowing UK labour market, this could strengthen Bank of England (BoE) interest rate cut speculation, and in turn hobble the Pound.