It is little surprise that the pound vs dollar rate has traded in a sideways motion over the last few days. A sparse UK data calendar this week has left the pound lacking economic impetus, causing it to remain at the 1.41 level against the dollar since the weekend.
With economic data thin on the ground, developments in the world of politics caught the attention of investors yesterday. British Prime Minister Boris Johnson’s former chief adviser, Dominic Cummings – the strategist behind the successful Brexit ‘leave’ campaign in 2016 and Mr Johnson’s landslide election victory in 2019 – was quizzed by British lawmakers on the lessons that can be learned from the pandemic. During his testimony, Mr Cummings delivered a scathing attack on the government’s handling of the coronavirus pandemic.
By this morning, the pound to dollar rate was only hovering above the 1.41 benchmark having briefly dipped below it overnight.
Fed calms inflation concerns
The dollar remained soft yesterday, following comments from Richard Clarida, the Fed’s vice chair, on Tuesday, who said that the central bank would be able to check inflation and create a “soft landing” without jeopardising the nation’s economic recovery.
Clarida’s comments indicated a change of course for the Fed after Chair Jerome Powell recently said it was “not yet” time to even contemplate discussing policy tapering. However, more recently central bank officials have admitted they are getting nearer to debating when to ease some of their fiscal support for the US economy.
Mortgage applications dropped in the US last week as the number of homeowners refinancing their loans decreased, offsetting a slight rise in applications for loans to buy homes. The Mortgage Bankers Association’s report showed yesterday that its seasonally adjusted purchase index fell 4.2% in the week ended 21 May from a week earlier – this represents a 7.2% decline in applications for refinancing.
The UK economic calendar is empty until next week. In contrast, a slew of notable data is scheduled for release from the US economy today including: Gross Domestic Product, Durable Goods Orders, Initial Jobless Claims for the week ended 21 May, and Pending Home Sales. But it’s the Q1 Core Personal Consumption Expenditures figure that will attract the most investor attention, as this is considered as an important indicator of inflation.