The pound remained rangebound on Wednesday, lacking impetus as investors digested Covid-19 data and waited for the Federal Reserve’s annual economic symposium – which begins today – to impact the dollar. Risk appetite has fluctuated recently, with riskier currencies such as the pound boosted by higher commodity prices at the start of the week. However, gains have been capped by concerns about the Delta variant of the coronavirus. A lack of immediate drivers on the horizon – a scenario that has largely been prompted by a barren UK economic calendar – has also contributed to the UK currency’s stagnation since recovering some of last week’s losses.
US durable goods orders dip in July
The safe-haven dollar ticked up slightly on Wednesday amid concerns that the highly contagious Delta variant could hamper the global economic recovery, and as investors looked ahead to the Fed symposium for clues on the timeline of monetary policy tapering.
New orders for key US-made capital goods were surprisingly subdued last month as supply constraints took their toll, indicating business spending on equipment abated at the beginning of Q3 after strong growth over the past year. However, business investment in equipment remains robust, with shipments of these capital goods accelerating in July. Such investment is expected to help offset cooling consumer spending and maintain the US economy’s growth trajectory this quarter.
The report from the Commerce Department on Wednesday showed orders for durable goods fell 0.1% in July. Economists had forecast a 0.5% decline. If transportation-related goods such as aircraft are excluded, new orders rose 0.7% last month.
Mortgage rates in the US dropped slightly last week, having risen for three consecutive weeks, which had little impact on mortgage demand. Total application volume increased 1.6% last week compared with the previous week, the Mortgage Bankers Association’s seasonally adjusted index showed on Wednesday.
Joel Kan, an MBA economist, explained the reason for the dip: “Treasury yields fell last week, as investors continue to anxiously monitor if the rise in Covid-19 cases in several states starts to dampen economic activity. Mortgage rates slightly declined as a result,”
Several influential economic indicators are slated for release from the US economy today: Gross Domestic Product, Core Personal Consumption Expenditures, Personal Consumption Expenditures Prices, and Initial Jobless Claims for the week ended 20 August.
Market attention is focused on the Jackson Hole symposium, at which some investors expect Federal Reserve Chair Jerome Powell to provide clues about tapering the central bank’s bond-buying programme.