The pound vs dollar rate embarked on a rollercoaster ride towards the end of last week. On Thursday, the pair jumped above the 1.37 benchmark after the Bank of England revealed that two of its policymakers had voted for an early end to pandemic-era government bond-buying. Consequently, markets brought forward their expectations of an interest rate hike to March.
It wasn’t long before the post-BoE rally dissipated, however, with the pound tumbling back into 1.36 territory on Friday. A sell-off in global stock markets following a surge in global financing conditions was largely responsible for the UK currency’s loss of form.
Dollar climbs on Evergrande uncertainty
The dollar moved higher on Friday, as uncertainty surrounding Chinese property developer Evergrande – the nation’s second-largest property developer – gave the US currency fresh impetus, having declined on Thursday.
The China Evergrande Group owes $305 billion but is running low on cash reserves, causing it to miss a deadline for paying $83.5 million on Thursday and leaving investors questioning whether it will pay up before a 30-day grace period expires. If the company collapses China’s financial system could be thrown into turmoil.
Sales figures for new single-family homes in the US rose for a second consecutive month in August. However, it is believed that demand for housing has probably peaked following a Covid-19 pandemic-fuelled buying spree. The data released by the Commerce Department on Friday also showed the supply of new homes on the market in August was the biggest in nearly 13 years, with prices unchanged on a monthly basis. The data followed news on Wednesday that sales of previously owned homes dropped last month. New Home Sales rose 1.5% to a seasonally adjusted annual rate of 740,000 units.
The UK’s economic calendar is light on influential data sets this week. Investors must wait until Thursday for the first release of note to be published when the Gross Domestic Product (GDP) reading for the second quarter hits the headlines.
In contrast, there’s a raft of data slated for release from the US economy this week, starting today with the publication of Durable Goods Orders and Nondefense Capital Goods Orders (excluding aircraft) – both for August. The GDP for the second quarter is also slated for release from the US economy on Thursday, and a slew of data on Friday includes the ISM Manufacturing Purchasing Managers’ Index for September.