Sterling Hits 10-month High against US Dollar
The Pound hit a ten-month high against the US Dollar, as the British currency got a boost by good news coming from the UK manufacturing sector. July’s UK manufacturing PMI data published by IHS Markit, beat analysts’ expectations and spread optimism that the British economy isn’t struggling. Data showed that the manufacturing sector bounced back, after recording a slowdown in June, thanks to surging new exports. Foreign demand for UK products rose by the fastest rate since April 2010.
Data regarding the manufacturing sector in the Eurozone was also positive, adding to the belief that the bloc is on the road to recovery from the financial crisis. Every Eurozone country reported growth in its manufacturing sector. Austria, Germany and the Netherlands recorded the largest growth among the Eurozone countries. In the US, the removal of Anthony Scaramucci from his post as White House communications director, increased political uncertainty. Scaramucci had been hired in this vital post just ten days ago.
Pound Sterling – UK Markets
Today, Sterling rallied against the US Dollar, with the exchange rate set at $1.32. The Pound strengthened against the Euro, with the exchange rate set at €1.11.
The Bank of England published data showing that unsecured consumer credit topped £200bn for the first time in the last nine years. Car loans, credit cards and overdrafts are included in unsecured consumer credit, which had reached the same level in December 2008, when the banking crisis had hit the British economy. Some economists suggest that this may indicate that UK households are willing and confident enough, in their financial positions, to increase borrowing. Moody’s, which is a credit ratings agency, published a report, regarding the problem, which said that some borrowers will struggle to repay their debts as the economy deteriorates.
The Financial Conduct Authority (FCA) has acknowledged the problem. In a report published yesterday, the FCA said that one out of six people with unsecured credit are in financial distress. According to the FCA’s estimates, the total number of people facing credit problems is almost 2.2 million. Andrew Bailey, the FCA’s chief executive, stressed that “high-cost credit products remain a key focus for us because of the risks they pose to potentially vulnerable customers.”
US Dollar – US Markets
The US Dollar jumped against the Euro, with the exchange rate set at €0.84. However, the US Dollar Index (DXY) recorded a 2.9% monthly decline in July. This was the fifth consecutive month that the DXY Index has dropped, which is the longest losing streak since April 2011.
Investors are worried that President Trump’s administration won’t be able to deliver the reforms that were promised during the pre-election campaign. Weak economic data and political uncertainty in Washington have dragged down the US Dollar. Despite the US Dollar’s mediocre performance, in July Wall Street managed to record the fourth consecutive month of gains. Sixty percent of the companies on S&P 500 have reported economic results so far, with 75% of them posting upbeat earnings in the second quarter of 2017.
White House communications director, Anthony Scaramucci, was removed from his post just ten days after his appointment. The New York Times reported that the decision for the removal was taken by the new chief of staff John Kelly, who is a retired general. Kelly was appointed by Donald Trump to restore order and discipline in the White House. Reince Priebus, who was the previous chief of staff, had come under fire from Scaramucci for alleged leaks, leading to his replacement by President Trump.
Euro – European Markets
The Euro dipped against the US Dollar, with the exchange rate set at $1.18. The release of the preliminary Eurozone GDP data for the second quarter of 2017 and IHS Markit’s surveys, regarding the manufacturing sector in the Euro-bloc, caught the attention of investors and traders today.
Eurostat published the preliminary Eurozone GDP data for the second quarter of the year. According to Eurostat, the Eurozone’s GDP grew by 2.1%, on a yearly basis, meeting the analysts’ expectations. The Eurozone’s GDP expanded by 0.6%, compared to the first quarter of 2017, again in line with forecasts.
IHS Markit published its Eurozone manufacturing PMIs for July. Data showed that growth across the Eurozone’s manufacturing sector slowed a bit in the last month, but remained strong. Every country in the Eurozone bloc reported growth, a good sign that the expansion is widespread, even in countries facing severe financial problems, such as Greece. July was the 49th consecutive month that Markit’s manufacturing PMI recorded expansion in the Eurozone.
Other Currencies – Highlights
The Pound strengthened against the Australian Dollar, trading at 1.64 AUD. The board of the Reserve Bank of Australia (RBA) announced its decision to keep its benchmark interest rate stable at 1.5%. In its statement released after the meeting, the RBA’s board explained that it kept the rate at a record low because “an appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.” The statement said that business conditions have improved and capacity utilisation has increased resulting in employment growth being stronger over recent months.
Sterling jumped against the New Zealand Dollar, trading at 1.76 NZD. The Labour leader, Andrew Little, resigned over “disturbing” opinion poll results that showed his party having the lowest support levels in more than twenty years. Jacinda Ardern replaced him in leadership, just two months before the parliamentary election. Political analysts suggest that this may be a game changing move, since the ruling centre-right National Party is expected to win the election by a big margin.