Pound to Dollar Rate Mounts Mini Recovery

Pound to Dollar Rate Mounts Mini Recovery

The pound climbed to within touching distance of the 1.35 level against the dollar on Thursday after receiving much-needed support from better-than-expected growth data. Although its rise was nominal compared to its descent earlier in the week when it slumped to a multi-month low (1.342).

The UK economy grew by 5.5% in the second quarter of 2021, exceeding forecasts of 4.8% growth, Office for National Statistics figures showed. UK Gross Domestic Product (GDP) is now just 3.3% off pre-pandemic levels.

UK house prices increased by 0.1% last month, comfortably missing economist expectations of a 0.6% rise, data from Nationwide showed on Thursday. However, house prices remain 10% higher than 12 months ago.

The pound’s gains were checked, however, by the end of the UK furlough scheme, which the government finally wrapped up despite protests from struggling sectors that are demanding another extension. HMRC figures revealed the popular scheme was still supporting the earnings of around 1.6 million workers at the end of July. According to Junior finance minister Simon Clarke: “it’s impossible to put an estimate on how many will lose their jobs.”

Jobless claims rise more than expected

The brakes were applied to the dollar’s surge by soft data on Thursday.

Initial jobless claims – the number of people filing first-time claims for state unemployment insurance – rose again last week to 362,000, the Labor Department said on Thursday. The move was prompted by sluggish hiring as the US contends with the delta variant of the coronavirus. Economists had forecast new filings to drop to 335,000 from 351,000 the previous week.

Factory sector activity in the Chicago region cooled more than expected last month the results of a closely watched survey revealed. The Chicago Purchasing Managers’ Index (PMI) – which captures business conditions across Illinois, Indiana and Michigan – slipped from a reading of 66.8 to 64.7. Economists had predicted a dip to 65.2. A reading above 50 indicates growth in the sector.

The US economy grew at a 6.7% annual pace in the second quarter after receiving a shot in the arm from government stimulus payments and Covid-19 vaccines allowed businesses to reopen. The revised data from the US Bureau of Economic Analysis exceeded economists expectations that GDP would hold steady at 6.6%.

Looking ahead

The Markit Manufacturing PMI for September is released from the UK economy this morning.

A slew of influential data is scheduled to be published in the US today, including: Core Personal Consumption Expenditures Price Index, Personal Income, Personal Spending, Markit Manufacturing PMI, Michigan Consumer Sentiment Index, ISM Manufacturing PMI.