Dollar falls against pound; jobs report in focus
New York (May 1) The dollar fell against the British pound Thursday as investors continued to remain more confident on the economic recovery in the U.K. than in the U.S.
The U.S. jobs report for April is due Friday.
The U.K. manufacturing sector in April expanded at the fastest pace in five months, according to data released Thursday, beating expectations.
The pound rose to $1.6899 from $1.6871 late Wednesday. The pound has had a nice run in 2014 as domestic economic data have improved, especially in the manufacturing sector, sparking speculation about when interest rates could rise, said Sara Yates, global head of foreign-exchange strategy at J.P. Morgan Private Bank. The pound has jumped 2% against the dollar in 2014 to date and posted a 1.2% gain in April.
“The market has increasingly relied upon the data and used it to become increasingly skeptical on how long the Bank of England can keeps rates on hold,” she said.
Yates said she’s bearish on the pound in the longer term, but it’s likely weakness will only come when investors become more confident about the U.S. economy. The top for the currency pair should be around $1.70, she added.
The ICE dollar index, which pits the greenback against six rivals, was at 79.521 versus 79.522 late Wednesday. The WSJ Dollar Index, an alternate gauge of dollar strength, was at 72.87 versus 72.85.
U.S. manufacturers in April grew at the fastest pace this year, with the Institute for Supply Management’s manufacturing index rising to 54.9% from 54.9% in March. Read: A global tour of the manufacturing PMIs
Other data released Thursday were mixed. Construction spending rose 0.2% last month, missing estimates of a 0.6% increase. First-quarter consumer spending rose at the fastest pace since August 2009. Jobless claims rose 14,000 to 344,000 in the week ended April 26, marking the second straight increase. Economists had expected claims to fall to 320,000.
A report on Wednesday showed the U.S. economy barely grew in the first quarter, in part because of the harsh winter weather. The Federal Reserve on Wednesday decided to reduce its monthly asset purchases by $10 billion for the fourth meeting in a row. The bigger question for the U.S. dollar is when the central bank could begin to raise rates, which would make U.S. assets more attractive. The Fed has reiterated that it won’t change its stance on rates for a “considerable time” after the end of its bond-buying program.
The dollar rose to ¥102.30 from ¥102.22 late Wednesday. The euro was little-changed from $1.3867 late Wednesday and the Australian dollar inched down to 92.74 U.S. cents from 92.89 U.S. cents.
