US dollar exchange rate 30/01: USD dominates global FX, US Economic Outperformance Confirmed
- Written by: Gary Howes
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The pound sterling to US dollar exchange rate is trading sharply lower on Thursday the 30th as the wider US dollar exchange rate complex finds broad-based support.
The the pound dollar exchange rate is (GBP/USD) is:
We also note the euro dollar exchange rate is under heavy pressure while the yen is also seeing losses. In short, today is about the comeback in the US dollar exchange rate complex.
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US dollar boosted by Wall Street earnings, improved sentiment
Updated View: "America’s economy grew by 3.2% (annualised) in the final three months of 2013, exactly as expected. While down from Q3’s 4.1%, the data suggests growth remained strong going into 2014. Importantly, consumer spending and exports made up a larger portion of GDP, suggesting a more sustainable basis for growth. Weekly jobless claims rose to 348K, slightly higher than the 330K expected. The strong GDP data helped add to the dollar’s improved tone this morning." - Omer Esiner at Commonwealth FX.
We note that at present the US dollar (USD) is positively correlated with risk sentiment on global markets.
So when we see stock markets recover as they are doing at present we see the US dollar being increasingly picked up.
Driving markets and sentiment higher today are good earnings, with Facebook being the standout example, and some decent macro-economic data.
"Data from the US showed that US jobless claims increased more than forecast over the past week, climbing by 19,000 to 348,000. Adding to negativity, US GDP data came in slightly less than expected with the economy growing 3.2% versus the 3.3% expected. Although the figure didn’t meet expectations, the figure was the highest in three years, laying the ground for further improvement in 2014," says Lee Mumford at Spreadex.
FOCM announcement provides needed stability
Overnight, the FOMC announced a further $10bn of tapering, as widely expected.
The tone of the statement was little changed, though the committee slightly raised its assessment of the current growth environment, viewing activity had picked up.
They viewed that economic growth will likely expand at moderate pace and they noted the "labour market indicators were mixed but on balance it showed a further improvement".
There was little indication of a possible pick in pace of tapering in upcoming meetings.
"With no new information and the outcome widely expected, market reaction was relatively muted. We expect the market to turn its focus to the first estimate of Q4 GDP released this afternoon. The market expects economic growth of 3.2% q/q saar," says Lloyds Bank Research.
While this is a slower pace than in Q3, the breakdown of the data should prove positive for the US.
For the latest US dollar exchange rate forecasts please consult our earlier piece dealing with today's exchange rate forecasts.
