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US Dollar Sustains Gains versus Pound despite Underwhelming US Non-Farm Payrolls

Last week’s high: $1.3165

Last week’s low: $1.2984

GBP/USD Pressured by Persistent Brexit Jitters and US Dollar Strength

Another bearish week for the Pound has dragged the Pound to US Dollar exchange rate back down to near its worst levels in months, despite the Bank of England’s (BoE) unanimous decision to hike UK interest rates.

The BoE voted to increase UK interest rates as expected and the decision was briefly perceived as hawkish – but some of the comments from BoE Governor Mark Carney that followed the decision indicated the bank was definitely concerned about the possibility of a worst-case scenario ‘no deal’ Brexit. Carney even indicated that a bad Brexit deal could cause the bank to cut UK interest rates again.

With Brexit weighing hard on the BoE outlook and Britain’s latest manufacturing and services PMI data, it was easy for a more bullish US Dollar to advance.

The Federal Reserve has indicated that despite criticism from US President Donald Trump it will continue to hike US interest rates undeterred at a relatively regular pace. This has left investors confident about the US economic outlook, even though Friday’s US Non-Farm Payroll report showed a smaller change in jobs and a lower job participation rate than expected.

USD Outlook: UK Growth and US Inflation in Focus

The economic calendar will be quieter for most of next week, with the Pound to US Dollar exchange rate more likely to react to potential developments in the Brexit process or news regarding the US-China trade spat – at least until later in the week.

Some more important US data will be published on Thursday, including July’s US Producer Price Index (PPI) results and June’s wholesale inventories figures, but Friday’s slew of data is much more likely to influence the Pound or US Dollar.

Many key UK Gross Domestic Product (GDP) figures will be published, including June’s monthly figures and projections for Q2 growth. On top of this, UK industrial production and manufacturing production data from June will be published, as well as UK business investment projections for Q2.

The week will be rounded off by July’s US Consumer Price Index (CPI) inflation rate results on Friday afternoon. However, unless next week’s US data indicates that US price pressures are much weaker than expected, the Pound to US Dollar exchange rate is unlikely to have much reason to rise.

 

Key Events

9th August

13:30 US PPI

15:00 US Wholesale Inventories

10th August

09:30 UK Trade Balance

09:30 UK GDP Growth Rate (JUN)

09:30 UK GDP Growth Rate (Q2)

09:30 UK Manufacturing and Industrial Production

09:30 UK Business Investment

13:30 US Inflation Rate

14:00 UK NIESR GDP Estimate

 

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

Arron Morris
Senior Currency Broker
T: 01442 892 065

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