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Cautious Fed Minutes Benefit Pound US Dollar Exchange Rate

Last week’s high: $1.3102

Last week’s low: $1.2893

Signs of Fed Dovishness Weigh on USD Exchange Rates

With the Federal Reserve showing greater reluctance with regards to raising interest rates again in the near future the mood towards the US Dollar soured.

As January’s Federal Open Market Committee (FOMC) meeting minutes showed a less hawkish tilt this gave the GBP/USD exchange rate a boost.

December’s US durable goods orders figure also disappointed, with the 1.2% uptick falling short of forecasts and denting confidence in the economic outlook.

A surprise slump in the latest Philadelphia Fed business outlook index put additional pressure on the US Dollar as the index plunged into negative territory.

With the US economy continuing to show signs of vulnerability USD exchange rates struggled to return to an uptrend.

Worries over the increasing risk of a no-deal Brexit weighed on the Pound, however, limiting the upside potential of the GBP/USD exchange rate ahead of the weekend.

USD Outlook: USD Remains Vulnerable to Underwhelming US Growth

Unless US data surprises to the upside this week the US Dollar could struggle to find any significant traction against its rivals.

Any slowdown in the fourth quarter annualised gross domestic product data may drag USD exchange rates lower across the board, with confidence in the economic outlook already muted.

Weaker economic growth would give Fed policymakers greater incentive to leave interest rates on hold for longer, to the detriment of the US Dollar.

If the personal consumption expenditure measure also shows an easing on the month this could shore up the GBP/USD exchange rate on Friday.

Even so, Brexit-based uncertainty looks set to keep the Pound under pressure in the weeks ahead, especially if the UK economy shows signs of weakness.

Key Events

26th February

15:00   US Consumer Confidence Index

27th February

13:30   US Advance Goods Trade Balance

28th February

00:01   UK GfK Consumer Confidence Index

13:30   US Annualised Gross Domestic Product

1st March

09:30   UK Manufacturing PMI

13:30   US Personal Consumption Expenditure Core

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To keep up to date with the US Dollar, visit the USD blog in our Currency News section.

Arron Morris
Currency Broker

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