Daily Market Update

Dollar Gains v. Sterling on Dovish Bank of England

August 03, 2017



The U.S. dollar was flat against all of its major counterparts, save the British pound, ahead of a slew of economic data this morning.  Overall, the greenback remains near multi-month or multi-year lows against nearly all of its European counterparts as optimism over the American economy has tempered somewhat.

The greenback could get much-needed boost today if data impresses.  Weekly jobless claims registered slightly better than expected, adding to the long-running narrative of an improving labor market.  Later sees the release of Markit service and ISM non-manufacturing indexes.  Factory orders and Durable goods are due out at 10 a.m. Eastern.  There are no Fed speakers on the schedule for today. 

While running the risk of sounding like a broken record, the week’s biggest risk event will be tomorrow’s Non-Farm payroll print.  



After reaching fresh highs against the U.S. dollar during yesterday’s session, the Euro took a small step back overnight.  German composite PMI registered at 54.7, after a 55.1 reading last month.  German PMI lagged behind that of France, Italy and Spain for the first time in 12 years.  Signs of a slowdown in Europe’s largest economy have weighed on the Euro but the common currency’s stalled momentum may only be temporary.  



The British pound fell from an 11-month high against the U.S. dollar in early trading today.  As widely expected, the Bank of England voted 6-2 to keep their current monetary policy in place. The central bank cut their economic forecast to 1.7% this year from a previous estimate of 1.9%.  As a result, traders pushed back expectations on when the BoE will first raise interest rates back to November of 2018.  Yesterday futures showed the expectations as August of 2018.  Following the decision, the sterling has fallen over a half a percent against the U.S. dollar and touched its weakest level of the year versus the Euro. 

Before the BoE, the sterling had found support as HIS Markit’s services Purchasing Managers Index rose to 53.8 last month from 53.4 in June.  The service sector is the largest part of the British economy.

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