- The British Pound is down as US economic data spurs increased demand for the dollar.
- US GDP experienced notable growth. Unemployment claims and durable goods orders exceeded expectations.
- Focus now shifts to the Core PCE Inflation Report due on Friday, which will offer insights into the Fed’s upcoming strategies.
On Thursday, the British Pound (GBP) weakened against the US dollar (USD) following stronger-than-expected US economic indicators, pushing the GBP/USD below the significant threshold of 1.3400.
As it stands, GBP/USD is nearly at 1.3366, reflecting a decline to levels not seen in three weeks, down about 0.60% for the day. In contrast, the US Dollar Index (DXY), which monitors the dollar against a selection of six major currencies, has seen a continual rise, hitting 98.30, the highest since September 5th.
The recent US data strengthens the perception that the economy is maintaining stability. Initial unemployment claims dropped to 218K, which is better than the anticipated 235K, down from 232K the week before. Additionally, the second-quarter gross domestic product (GDP) growth was revised upwards from 3.3% to 3.8%, comfortably exceeding expectations, while orders for durable goods saw a sharp rise of 2.9% in August after a notable decline in July.
The inflation details from the GDP report presented a slight surprise, revealing that core personal consumption expenditures (PCE) rose to 2.6% from 2.5% in the second quarter. However, traders appear hesitant to make significant moves ahead of the core PCE inflation figures set to be released on Friday.
Kansas City Federal Reserve President Jeffrey Schmidt commented on Thursday that current monetary policy is “slightly restrictive” and feels to be “in the right range.”
While Schmidt acknowledged that inflation remains “too high,” he noted that the job market is “mostly balanced.” Yet, he cautioned that recent data indicates “increasing risks” to employment, highlighting the challenges the Fed faces in balancing its goals.
He stressed the importance of the Fed staying “close to fulfilling its responsibilities” while also noting that the recent rate cuts are appropriate for mitigating risks in the labor market.
