No respite for the dollar
Sterling fell to a one week low on Thursday morning but bounced back in the afternoon as the Fed remained less dovish than expected. The Fed minutes were vague, saying a number of committee members thought a revised statement on policy strategy would be helpful at some point, without providing details or timing. They struck a cautious tone about the US recovery.
The pound has risen more than 7% versus the dollar in the past three months, but analysts have said this has more to do with the greenback than optimism over cable, as the coronavirus pandemic and Brexit woes mostly justify sterling depreciation. Recent dollar weakness has led to cable appreciation as opposed to sterling strengthening.
Furthermore, little progress has been made between the UK and the EU in terms of trade negotiation talks and this could bear on the pound in the coming weeks if talks fail to progress.
The dollar fell on Thursday against most major currencies after a rise in US jobless claims and a dip in Treasury yields dampened the appeal of holding the greenback.
A larger-than-expected rise in weekly US jobless claims came just one day after Fed officials warned that a recovery in hiring is starting to slow, raising doubts about how quickly the world’s largest economy will bounce back from the coronavirus.
Concern about the US economy, combined with an excess supply of dollars already in circulation due to the Fed’s massive quantitative easing, are likely to weigh on the US currency in coming weeks.
09:00 – EUR – Flash manufacturing PMI – Forecast at 52.7 from previous 51.8
09:00 – EUR – Flash services PMI – Forecast at 54.6 from previous 54.7
09:30 – GBP – Flash manufacturing PMI – Forecast at 54 from previous 53.3
09:30 – GBP – Flash services PMI – Forecast at 57 from previous 56.5
14:45 – USD – Flash manufacturing PMI – Forecast at 51.9 from previous 50.9
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