Today has seen Sterling make further gains against the U.S dollar as rates pushed towards $1.56 (the highest level we have seen the GBP/USD cross since 14th February). Better than expected UK Manufacturing numbers were the key driver behind the movement and in a matter of minutes exchange rates had jumped by over half point to reach a high of $1.5594. For more information on the exchange rates I can offer click here.
UK Manufacturing PMI figures released this morning (Wednesday) came in at 49.8 (anything over 50 indicates growth) which showed only a small contraction for the sector in April, it had been forecast that today's figures would come in at 48.5 so this mornings positive reading added some extra support to the pound and pushed exchange rates up across the board.
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The UK Manufacturing sector plays a major role in the overall picture of the UK economy and the positive manufacturing data could reduce the chances of the Bank of England looking at further stimulus when policymakers meet next week. If MPC members opt to keep the current quantitative easing package on hold we may see sterling climb even higher against the Greenback.
Another reason we have seen exchange rates climb over the last 48 hours is down to some positive date coming out of the U.S. Yesterday saw the States release it's latest Consumer Confidence numbers and the news was far better than anticipated.
But how can positive U.S data weaken the dollar?
The U.S is often seen as a safe-haven so when there are issues in the euro-zone or UK investors will head to the safety of the worlds largest economy. Yesterdays positive U.S data will have prompted a change in risk appetite, when the U.S is performing well it can lead to investors looking into riskier assets, which is exactly what we witnessed yesterday afternoon. Although the pound gained against dollar it actually fell against the euro as investors headed towards the single currency.
So what could impact exchange rates over the next few days?
This evening will see the FED announce the latest interest rate decision, although it is forecast that rates will remain on hold a surprise announcement could cause some movement in the currency markets.
Tomorrow will see the latest European Central Bank (ECB) interest decision, it has been rumoured that the ECB may look to cut rates tomorrow and if that is the case we could see the Euro weaken and safe haven flows increase into the dollar which in turn would bring down the GBP/USD exchange rate.
Friday sees the latest U.S non-farm payroll numbers. The figures show how may jobs have been created in the U.S outside of the farming sector and in the past couple of months have caused some major movements in the currency markets. The number are impossible to predict and I would expect the markets to react instantly on the back of the data release.
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I will of course keep you updated with how the next couple of days pan out. In the mean time if you have a requirement to buy or sell dollars in the coming weeks and want to make sure you have all the tools available, use the link below and complete the contact form for a free, no-obligation consultation.
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