The pound picked up where it left off the previous day, rising to a nine-day high of 1.3979 against the dollar overnight on Thursday. Propelling it higher was the Fed’s dovish outlook following its two-day meeting of monetary policymakers, who believe it is too early to consider rolling back the central bank’s emergency support – a tone that prompted the dollar to weaken.
A dearth of data from the UK economy this week has shifted investor focus to other events, including political developments in Westminster, where Prime Minister Boris Johnson has had several accusations levelled at him: how he responded to the pandemic; who paid for the refurbishment of his Downing Street flat; together with an inquiry into leaks of private information from his office.
Despite benefiting from softer dollar conditions, reports that costs for Mr Johnson’s flat were initially covered by donations – and the subsequent investigation by the Electoral Commission – appear to be limiting the pound vs dollar rate’s push towards the 1.40 resistance level.
The second – and final – piece of data from the UK economy this week was released this morning: a report by Nationwide showed annual house price growth bounced back to 7.1% in April, from 5.7% in March – the average price standing at £238,831, up 2.1% from March. The housing boom has maintained its momentum, with April posting the biggest monthly rise in UK house prices since February 2004.
US economic rebound gains momentum
The dollar, which was dogged by Fed inflicted headwinds yesterday, was hoping a raft of data from the US economy could reverse its fortunes.
The most hotly anticipated release was the latest gross domestic product (GDP) reading – the sum of all goods and services produced in the economy. The figures from the Commerce Department showed economic activity has boomed in 2021, as rapid vaccinations and government spending helped the US economy rebound from the Covid-19 pandemic. GDP jumped 6.4% for the first three months of the year on an annualised basis – the second-best period for GDP since Q3 2003. Q4 of 2020 accelerated at a 4.3% pace.
New weekly jobless claims dropped to a fresh pandemic-era low last week, as the accelerating pace of vaccinations continues to support the labour market’s recovery. Initial jobless claims remained below 600,000 (553,000) for a third straight week, falling to their lowest level since mid-March 2020 before the pandemic dented the US economy.
Several notable pieces of data are scheduled for release in the US today, including personal income and personal spending figures.