Safe-Haven Demand Drives US Dollar (USD) to GBP, EUR, AUD Exchange Rates Higher
The British Pound to US Dollar exchange rate continues to trade within a very narrow trading range as the effect of better than expected UK economic data out yesterday was cancelled out by a rise in demand for the safe haven qualities of the US Dollar as a stinging report on the Greek economy from the International Monetary Fund (IMF) raised the stakes ahead of Sunday’s referendum.
A quick foreign exchange market summary before we bring you the rest of the report:
On Wednesday the Euro to British Pound exchange rate (EUR/GBP) converts at 0.855
FX markets see the pound vs euro exchange rate converting at 1.169.
The GBP to CAD exchange rate converts at 1.72 today.
FX markets see the pound vs australian dollar exchange rate converting at 1.921.
Today finds the pound to us dollar spot exchange rate priced at 1.253.
Please note: the FX rates above, updated 1st May 2024, will have a commission applied by your typical high street bank. Currency brokers specialise in these type of foreign currency transactions and can save you up to 5% on international payments compared to the banks.
UK Construction PMI Lends Pound Sterling (GBP) Exchange Rate Support: GBP/EUR, GBP/USD Fluctuations Forecast
The Pound found support in heavy trading yesterday after Markit and the Chartered Institute of Procurement & Supply (CIPS) reported that the UK construction sector bounced back in June after the sector hit a 22-month low in April. The data pointed to the fastest increase in overall construction activity since February.
Tim Moore, Markit's senior economist said "UK construction companies experienced a growth rebound and surge in business confidence at the end of the second quarter. Survey respondents cited robust inflows of new work in June, adding to already strong order books across the sector. Extra workloads and positivity regarding the year ahead outlook meant that job creation accelerated to its strongest so far in 2015."
Howard Archer, chief economist at IHS Global Insight said "This is a really encouraging survey, although it needs to be borne in mind that the construction sector only accounts for 6.4% of GDP. Nevertheless, this is an antidote to the disappointing manufacturing purchasing survey for June. A much improved purchasing managers' survey for June boosts hopes and belief that the construction output returned to growth in the second quarter and contributed to improved GDP growth. Construction output contracted 0.2% quarter-on-quarter in the first quarter after expanding an upwardly revised 9.5% in 2014."
US Employment Data Flop Helps 'Cable' Climb, USD/EUR, USD/AUD, USD/GBP Rates Decline
The rate of exchange between the Pound and the US Dollar should have strengthened further in the afternoon after the publication of the latest US non-farm payroll data showed that the US economy created fewer new jobs in June than had been expected. The data showed that US non-farm payrolls increased by 223,000 in June, coming in well below the forecast for a rise of 233,000.
Bill Hubard, chief economist at Bankor said "Overall, this cannot be regarded as a strong release, and will dampen market thoughts of Fed September "lift-off". But we feel strongly that this is/would be a mistake, as this is very volatile data, and we think it is more likely that the payrolls data eventually swings behind other high frequency labour indicators in coming months, which are running quite strong, than the other way around.”
Greek Referendum Forecast to Cause Major Currency Market Movement Next Week: EUR/GBP, EUR/USD, EUR/CAD Exchange Rate Movement Likely
The US Dollar found support however on the back of a new rise in risk aversion in the financial markets after a report from the IMF raised the stakes ahead of Sunday’s Greek referendum. The IMF report bluntly states that Greece’s debt dynamics are "unsustainable" and the country needs to get serious about reforms if it hopes to fix the situation
Greece of course on Tuesday became the first developed nation in the 71 year history of the IMF to default. The IMF has also warned that Greece may require a debt write down without sufficient reform and strong growth.
The IMF analysis is that the situation is so bad for Greece that the government needs about €51.9 billion between October 2015 and December 2018 and that the economic position in the country has worsened. Last year, the IMF predicted Greece's debt would fall from 175% of economic output in 2013 to 128% by 2020. Now it sees Greece's debt reaching 150% by 2020.
Of serious concern, the IMF analysis is that even if Greece had the highest participation rate in Europe, the lowest unemployment rate and average productivity gains the Greek economy would still grow at less than 1% a year.
The IMF recommends that Greece implements "full and decisive" implementation of structural reforms.
Given the very complicated outlook both for Greece and the euro zone, analysts are warning that it is more than likely that in the short term at least, demand for the safe haven qualities of the US Dollar should be buoyant.