The pound shot to its highest level in more than a month against the dollar on Thursday. Positive sentiment towards the UK currency has been fuelled by falling Covid-19 cases in Britain. Despite infection numbers rising again on Wednesday for the first time in a week compared with the previous day, they were still lower week on week – and the pound managed to absorb any concerns. Meanwhile, dovish Federal Reserve rhetoric has weighed on the dollar, with Chair Jerome Powell stating that rate increases were “a ways away” following its July meeting of monetary policymakers.
A busy day in the economic data calendar was dominated by a slew of influential releases from the US on Thursday.
The US economy grew at a sluggish rate in Q2, the Commerce Department said on Thursday, indicating that it is on the road to recovery from the pandemic but still has more work to do. Gross Domestic Product – a measure of all goods and services produced between April and June – picked up by 6.5% on an annualised basis, building slightly on the 6.3% gain in Q1, which was revised down narrowly. However, the gain was significantly below the 8.5% forecast by economists. The headline gain underscored the US economy’s progress since the lockdowns imposed at the start of the pandemic stunted economic activity.
The number of people filing first-time claims for US state unemployment insurance fell last week, which points towards improving labour market conditions even as the delta variant of Covid-19 increases cases globally. Initial Jobless Claims amounted to 400,000 in the week ended 24 July, down 24,000 from the previous week, the Labor Department reported on Thursday. Economists had estimated 385,000 new applications.
Residential housing contract activity for existing single-family homes in the US fell last month in line with a spike in home prices, after rebounding strongly in May. The National Association of Realtors (NAR) Pending Home Sales Index dropped 1.9% to 112.8. Economists had forecast sales would edge up 0.3%.
Lawrence Yun, the NAR’s chief economist, said in an accompanying statement: “Pending sales have seesawed since January, indicating a turning point for the market,” adding “Buyers are still interested and want to own a home, but record-high home prices are causing some to retreat.”
The UK economic calendar is empty as the week concludes. In contrast, several notable data sets are scheduled from the US today: Personal Income, Personal Spending, the Chicago Purchasing Managers’ Index, and the Michigan Consumer Sentiment Index.