Pound US dollar exchange rate tanks as USD rally continues

After a brief respite at the start of the week, the pound continued to plummet against the US dollar on Tuesday, as rising US rate expectations prompted investors to leap back on the US currency.

Meanwhile Sterling appears to be on the back foot this morning, with GBP/EUR slipping to €1.1405, GBP/CAD edging down to C$1.7353, and both GBP/AUD and GBP/NZD tumbling – falling to AU$1.8043 and NZ$1.9615 respectively. Only GBP/USD appears to be stable today, holding at $1.3502.

The Eurozone will publish its final CPI figures for April later today, with the euro potentially sliding if the figure confirms inflation slowed last month as expected…

What’s been happening?

The pound pushed higher against the majority of its peers on Tuesday in response to the publication of the UK’s latest labour data, which reported the end of a year-long squeeze in basic pay.

This uptick in Sterling sentiment was also supported by the accompanying unemployment figures, with the UK’s jobless rate holding at a 42-year low on the back of some stronger-than-expected employment growth.

However the pound’s gains were trimmed slightly as analysts suggested that the slowing in wage growth (including bonuses) provided some justification for the Bank of England’s (BoE) decision to leave interest rates on hold this month.

Other support for the GBP/EUR exchange rate came from the news that some ‘less dynamic’ trade in the first quarter saw a sharp slowdown in German economic growth at the start of 2018.

Germany’s latest GDP figures revealed Europe’s largest economy only expanded 0.3% in the first three months of the year, down from 0.6% from the end of 2017 and weakening the appeal of the euro.

At the same time the GBP/USD exchange rate plummeted over a cent yesterday, striking its lowest levels so far in 2018 as the US dollar was buoyed by some robust retail sales figures.

While US sales growth was shown to have slowed from 0.8% to 0.3% in April the release still lifted expectations of an accelerated pace of US rate hikes this year. 

What’s coming up?

Looking ahead, the pound may struggle to find any traction during today’s session as a lull in economic data leaves the currency with little momentum.

The euro, meanwhile, could face some losses later this morning as the final reading of April’s CPI figures for the Eurozone are expected to confirm inflation slowed from 1.3% to 1.2%.

This may led to further losses later in the session should European Central Bank (ECB) President Mario Draghi express concern over the slowing of inflationary pressures in a speech concluding the ECB’s latest non-monetary policy meeting.

Finally the US dollar may continue its unrelenting march higher today, with the latest US industrial production figures expected to show that US factory output ticked higher in April.