Signs of stabilisation have been witnessed in the pound to US dollar exchange rates overnight following recent lows which saw the exchange rate pairing drop to its lowest level since 1985. The US dollar was boosted by the announcements from both the Reserve Bank of Australia (RBA) and the European Central Bank (ECB) overnight which saw further monetary policy loosening measures like quantitative easing being unveiled, which helped to limit the sense of safe-haven demand. USD struggled to find any rallying points against major rivals as the persistent pressure from the coronavirus on the global economy continued to put up a fight. However, despite the chance of a global recession still relatively high, USD exchange rates manage to retain a positive footing into this morning’s trading session.
Economic Data Sinks USD Strength as Manufacturing and Job Sectors Take a Hit
Today saw the release of some important US economic data. The March Philadelphia Fed manufacturing index was unveiled at 12:30 GMT and saw the index drop from 36.7 to -12.7. This result shocked markets and took a large hit at the US dollar’s value. The Philadelphia Fed Survey is a spread index of manufacturing conditions (movements of manufacturing) within the Federal Reserve Bank of Philadelphia. This survey, served as an indicator of manufacturing sector trends, is interrelated with the ISM manufacturing Index (Institute for Supply Management) and the index of industrial production, it is also used as a forecast of The ISM Index. Following the drop in the index, the market highlighted the vulnerability of the manufacturing sector following the coronavirus outbreak which has disrupted the global supply chain.
Added to the poor demand for manufacturing, the US initial jobless claims data also revealed startling figures with a rise in initial jobless claims for March rising from 211k to 281k. Claims are often the early warning for labour market problems. Jobless claims for the March 13 week may give hint of coming layoffs. Markets are in an extremely unsettled condition following the coronavirus outbreak and many individuals are losing jobs as businesses are forced into closure.
Both economic releases went out of the US dollar’s favour, which means GBP traders could see an edge over the American currency as it attempts to lick its wounds.
Pound Remains Under Pressure From Brexit and Governmental Debt
Though the pound could benefit from the US dollar’s weakness, the British currency faces issues of its own. Chancellor Rishi Sunak’s fiscal stimulus plans for the UK failed to impress investors this week, with concerns remaining about the imminent ballooning of the UK governments debt in response to the global economic volatility. Brexit also remains an unanswered question for the UK which many had expected to be the focus of the year for the nation. But with the coronavirus spreading rapidly through the country, and the UK remaining to function without any form of ‘lockdown’ measure similar to that of Italy and Spain, the country’s position could worsen in the weeks/months to come.
If you would like to learn more for an upcoming currency transfer, you can get in touch with me directly, Royston Howell, using the form below.