Dollar ends higher as US growth supports interest rate hike
31/Jul/2015 • Currency Updates•
Strong data in the US caused the UK currency to end the London session lower against the Dollar yesterday, depreciating by 0.2%.
There was limited data to report in the UK yesterday, with Sterling volatility dependent on events elsewhere, namely impressive figures out of the US. Last night, we did have the latest consumer confidence index from Gfk. According to the index, consumer confidence in the UK economy dipped marginally last month from a reading of 7 to 4. Although disappointing expectations, the measure is still hovering close to its highest level since the financial crisis and highs hit way back in 2007. This high confidence among consumers comes amid improved pay, increased job security, and higher spending power as a result of low inflation.
Today will mark a quiet end to the week for the UK economy as far as economic indicator data is concerned. Traders’ attention will instead switch to next week. The Bank of England’s interest rate decision on Thursday will be coincide with the central bank’s quarterly inflation report.
A poor day’s trading for the Euro saw the single currency finish lower against both the US Dollar and Sterling, ending the London session 0.4% down against the Greenback.
Confidence in the Eurozone economy hit a four year high in July according to the latest figures, while the European Central Bank claimed that recovery in the area was picked up at its latest economic bulletin. According to policymakers, the recovery has been aided by loose monetary policy settings aimed at countering consistently low inflation. The latest industrial confidence index for July increased from -3.4 to -2.9, while services sentiment soared from a reading of 7.9 to 8.9.
Elsewhere, there were some generally disappointing data releases in Germany. Despite unemployment remaining at an unchanged 6.4% rate in July, the number of those unemployed actually increased by 9,000 this month, following on from last month’s 1,000 increase. Meanwhile, consumer prices picked up, although less than last month, with inflation just 0.2% this month, down on the 0.3% recorded in June.
Today will see a string of economic indicator data out in the Eurozone economy. This will focus on retail sales in Germany and inflation data for the Euro-area at 10am BST.
The Dollar rallied against its major peers yesterday afternoon, boosted by strong growth figures painting a reassuringly bright picture about the health of the US economy. The US Dollar index increased by 0.4%.
Encouraging growth data released across the pond yesterday provided further evidence that the US Federal Reserve is likely to begin hiking interest rates at the September FOMC meeting. The initial estimate of economic expansion for the second quarter showed that the US economy grew at an annualised pace of 2.3% in the three months to June. According to the Commerce Department, growth was boosted by a 2.9% increase in consumer spending, compared to just 1.8% in the first quarter, aided by a decrease in fuel prices. Quarter on quarter growth printed at 0.6%, and there was also an upward revision in the first quarter figure.
Elsewhere, jobless claims boded well for the next nonfarm payroll figure. Despite inching upwards from its lowest level since 1973, the weekly jobless claims data came in at a better-than-forecast 267,000.
A relatively subdued end to the week in the US economy, with traders continuing to focus on interest rate timings. In terms of data, we’ll see the employment cost index and Reuters consumer sentiment index, both of which could cause moderate Dollar volatility.