US Dollar rate improves

5 April, 2016

Robin Haynes

The US Dollar was cheaper against the Pound in trading yesterday, as mixed signals on US interest rate rises sent the Greenback lower. Janet Yellen, Federal Reserve chairman, said last week that US interest rate rises would proceed “cautiously” this year, while Boston Fed President Eric Rosengren said yesterday that it was “surprising” that only one rate rise had been priced in to the markets. Investors are trying to reconcile differing opinions from US officials on interest rate rises – which themselves are one of the main factors in the value of the US Dollar.

US factory order figures yesterday were also worse than expected, and business spending was much weaker than initially thought, both of which helped those of you sending money to the USA by sending the dollar down in price as the picture for the US economy so far in 2016 now looks a little worse than before.

Euro cheaper on unemployment – but not for long
The Euro buying rate also benefitted from weaker figures yesterday, with Eurozone unemployment as expected but producer inflation falling further than anticipated. Producer prices fell 4.2% in the 12 months to February, sparking deflation fears in the single currency zone, and the Euro itself fell in price through morning trading yesterday. However in the afternoon we saw exchange rates fall back again as sentiment took over and the recent trend for a falling GBP-EUR rate continued, giving a new lowest rate for buying Euros since November 2014. It does seem that any improvements in rates for buying Euros are short lived in the current market.

Meanwhile talks are due to resume this week between Greece, the EU and the IMF, on a bailout review. Greece of course agreed terms on its bailout last year, but must demonstrate its reforms have progressed to the satisfaction of its creditors, in order to unlock further funds – or face default on its repayments due in the summer. This story, along with the UK referendum on EU membership in June, could shape the future of the single currency, meaning more exchange rate volatility for the foreseeable future.

Quiet day ahead
Today we have no data of note due out likely to affect currency prices, although a raft of minor figures through the day could give us a little movement. There is no major UK data coming out until Friday, which sees industrial & manufacturing production and trade balance figures released at 9.30am.