The GBPUSD pairing is currently trading at some of the strongest levels seen this year. Despite a weaker than expected UK Construction PMI for July released this morning which was caused by a lack of investment in the commercial sector following Brexit, I personally think that this highlights the current frailties in the US Dollar. The fact that despite weaker than expected data from the UK, cable exchange rates still remain favorable for those looking at buying the Greenback shows this.
The US Dollar has received a poor run of late following a mix of negative economic data and poor political decisions. I personally think the two are linked quite closely, as President Trump fails in the eyes of the Trump Administration which massively favored US companies and business, they will start to lose faith which will cause the USD economy to start to slow.
What’s the long-term outlook for USD?
However, I feel that the USD always has the ability to bounce back. Firstly, the global economic recovery seems to gathering momentum, with both the Eurozone, China and Australia showing strong Q2 growth figures. This will no doubt start to feed through into the American economy at some point which will, in my opinion translate into longer term USD strength.
Data releases to look out for this week
Closer to home, this week we have two major events which could heavily influence cable. Firstly, tomorrow the Bank of England will deliver the latest inflation report, followed by the latest decision on interest rates and subsequent speech from Mark Carney, governor of the Bank of England. Although the market is expecting no change to interest rates, I feel as though the future guidance from Mark Carney will cause the Pound to weaken, namely because of the recent expressed concern of personal debt levels in the UK.
On Friday, Non-farm payroll data is the big event. This is keenly watched by investors as an indicator of the strength of the US economy, and last month there was a significant increase which helped the US recover some of the recent levels. I would expect these figures to drop ever so slightly following the huge jump last month. If these figures come in lower than expected, I wouldn’t be surprised to see a drop in the Dollar’s value.