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Pound to Dollar Rate Slumps to Month-Long Low

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The pound sunk below the 1.37 benchmark on Thursday and in doing so registered a month-long low against the dollar, which was revelling in its safe-haven status. According to market analysts, the US currency’s surge appeared to be triggered by the crisis in Afghanistan, China’s corporate crackdown and the rapidly spreading delta variant of the coronavirus. The dollar was already profiting from a risk-off mood in markets following minutes from the Federal Reserve’s latest meeting released on Wednesday, which showed policymakers expect to reduce pandemic-era stimulus before the year is out.

First-time filings for unemployment insurance fell to a 17-month low last week, signalling another month of robust job growth, despite concerns over the impact of delta variant on the labour market recovery. Jobless claims for the week ended 14 August fell 29,000 from the previous week to a seasonally adjusted 348,000, the Labor Department reported Thursday, missing economists estimate for 365,000 applications for the latest week. Claims have not sunk this low since 14 March 2020, when the Covid-19 pandemic began ravaging the US economy, sending it spiralling into its deepest recession on record.

The pace of growth in factory activity in the US mid-Atlantic region slowed for a fourth straight month in August amid shortages of raw materials and a pivot in spending from goods to services. This marks a significant reversal of fortunes for manufacturing output in the region, which hit its highest pace in nearly half a century earlier this spring. The Philadelphia Federal Reserve Bank revealed its business activity index dropped to 19.4 in August – its lowest reading since December – from 21.9 the previous month. Economists had forecast the survey would post 23.0. Any score above zero indicates expansion.

UK retail sales fall sharply

Overnight, it was revealed that UK consumer confidence edged lower in August but remained at pre-pandemic levels. The GfK Consumer Confidence Index registered -8, down one point from July. Economists had expected the reading to remain unchanged at -7. Joe Staton, GfK’s client strategy director, said: “Against a backdrop of cooling headline inflation and soaring house prices, the UK consumer confidence index is stable at minus 8 this August,”

An already embattled pound – which was perched just above the 1.36 level against the dollar – was dealt a further blow by retail sales data this morning. Sales in the UK dropped sharply last month, as the boost from the Euro 2020 football tournament faded. The figures from the Office for National Statistics showed sales volumes fell 2.5% from June.

Looking ahead

We must wait until Monday for more influential data from both sides of the Atlantic when information provider IHS Markit releases the manufacturing and services PMIs for the UK and US economies.

The post Pound to Dollar Rate Slumps to Month-Long Low appeared first on Pound Sterling Forecast.


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