Pound to Dollar Rate Still Feeling Weight of BoE Comments

The pound vs dollar rate was choppy on Monday, as it fluctuated between the 1.38 and 1.39 levels. A lack of impetus has been a common theme for the pound in June, which is on course to be the UK currency’s worst month against the dollar since September. Not only was the pound one of the worst-performing G-10 currencies last week following the Bank of England’s latest meeting of monetary policymakers – who left interest rates and bond purchases untouched – earlier in the month it dropped below 1.38 against a strengthening dollar for the first time since April.

Average house prices in the UK jumped 13.4% year on year in June – buyers’ final chance to take advantage of the full stamp duty holiday – the Nationwide Building Society said on Tuesday. Prices hit £245,432, the highest level since November 2004. The figure is also 0.7% higher than last month.

By this morning, the pound to dollar rate had slipped back to 1.38.

Dollar boosted by comments from Fed official

Comments from President of Federal Reserve Bank of New York, John C Williams appeared to give the dollar a shot in the arm yesterday, after he argued that issues such as access to central bank accounts should be in the spotlight. Williams added: “Money market funds and treasury markets can lose liquidity in times of stress,” and “Demand for the US dollar in paper currency is growing.”

The pace of manufacturing output in Texas accelerated this month compared with May, while costs continued to rise, the Federal Reserve Bank of Dallas said yesterday. The Dallas Fed Manufacturing Business Index – a key gauge of manufacturing conditions in the state – increased to 29.4 in June from 15.7 the previous month, signalling strong output growth.

Looking ahead

Political risks have the potential to compound the pound’s woes this week, as investors monitor a dispute between Britain and the EU over post-Brexit trade in Northern Ireland. The current grace period waiving checks on British-made chilled meats transported to Northern Ireland is scheduled to expire on 30 June. Dubbed the ‘sausage war’ by the press, Britain is still waiting to receive a formal response from the EU over its proposal to further extend this period.

Investors in the dollar appeared largely cautious ahead of Friday’s much-anticipated US non-farm payrolls report, which has the potential to steer the direction of the Federal Reserve’s monetary policy. They will also be keeping a close eye on today’s US consumer confidence reading and the Institute for Supply Management’s Manufacturing PMI on Thursday for signs of where interest rates are headed.

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