Pound to Dollar Rate Recovers Some Losses
The pound tumbled to 1.38 against the dollar on Friday as the US currency rebounded higher on month-end and week-end profit-taking.
A raft of data from the US included the personal consumption expenditure price index from the Commerce Department, which rose 0.5% in March. Excluding volatile food and energy prices, the core rate rose 0.4%, exceeding economists’ forecasts of a 0.3% gain. The sharp rise in producer and consumer prices in March – caused by temporary base effects – pushed heading inflation up 2.3% over the past year from 1.5% in February – the highest rate since July 2018.
US Federal Reserve Chairman Jerome Powell continues to reaffirm his belief that accelerating inflation readings are temporary. The central bank has stated that it will let inflation run above its 2% target for a time to make up for the prolonged period inflation was below its target.
Trading was thinned by the bank holiday in the UK yesterday, limiting volatility. The dollar levelled out after last week’s bounce as investors made a tentative start to a data-heavy week that will offer clues on the global inflation outlook and central bank responses.
First up from the US economy was the ISM manufacturing PMI, which edged lower to 60.7 in April. While the reading showed economic activity in the manufacturing sector continued to grow at a strong pace last month, it came in weaker than the 37-year high (64.7) set in March and missed the market forecast of 65.
Further details of the ISM report showed that the employment index dropped to 55.1 from 59.6 and the prices paid index jumped to 89.6 from 85.6 – its highest level since 2008. Finally, the new orders index edged lower to 64.3 from 68.
In remarks prepared for a conference of the National Community Reinvestment Coalition, Jerome Powell said “The economy is reopening, bringing stronger economic activity and job creation,” Speaking yesterday, the Federal Reserve Chair added “That is the high-level perspective – let’s call it the 30,000-foot view – and from that vantage point, we see improvement. But we should also take a look at what is happening at street level.”
By this morning, the pound vs dollar had recovered some of its losses from the end of last week but remained below the 1.39 benchmark.
Looking ahead
The Markit manufacturing PMI for April hits the headlines this morning. This indicator of the economic situation in the UK manufacturing sector is forecast to hold steady in expansion territory.
Goods and services trade balance and factory orders figures – both for March – are slated for release from the US economy today. However, investors will be focused on services sector surveys tomorrow and April labour market numbers on Friday.
The post Pound to Dollar Rate Recovers Some Losses appeared first on Pound Sterling Forecast.
Source: https://www.poundsterlingforecast.com/2021/05/pound-to-dollar-rate-recovers-some-losses-2/
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