Dollar firm after signs of a stable U.S. economy, pound ticks up

By: Andia Rispah
Andia Rispah
Andia Rispah is a Personal Finance & Investment Writer who helps Financial Advisors to create valuable content to help… read more.
on Dec 23, 2019
  • The dollar held firm, as the U.S. data pointed to steady economic growth.
  • The pound bounced slightly after suffering its biggest weekly fall in three years.
  • China looks to boost imports amid a slowing economy and trade war with the U.S.

At the start of a holiday-thinned week, the dollar held firm, as the U.S. data pointed to steady economic growth. The pound bounced slightly after suffering its biggest weekly fall in three years.

Economic data published on Friday showed the U.S. economy was already in its longest expansion in history. It appears to have maintained the moderate pace of growth as the year ended- receiving support from the labor market.

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According to the Commerce Department, GDP increased at a 2.1% annualized rate in its third estimate of the third-quarter GDP.

The Commerce Department unveiled the figures from November’s estimates.

The U.S. economy appears to have stopped slowing. There is no indication it will be hitting a recession,” said Ayako Sera.

Ayako is the market economist at Sumitomo Mitsui Trust Bank.

Earlier this year, investors feared the possibility of a U.S. recession when the U.S. yield curve inverted. It has been historically one of the most reliable signs of a U.S. downturn.

Separate data showed consumer spending rose 0.4% last month as households stepped up purchases of motor vehicles and spent more on healthcare. 

Consumer spending accounts for more than two-thirds of U.S. economic activity.

That contrasted with an unexpected deterioration in German consumer sentiment.

Currencies

On Saturday, President Trump said the U.S. and China would “very shortly” sign their so-called Phase 1 trade pact.

On Monday, China said it would lower tariffs on products ranging from frozen pork and some technology products next year.

China looks to boost imports amid a slowing economy and trade war with the U.S.

Optimism over the global economy since the U.S. and China came to an initial trade agreement earlier this month has supported the dollar.

The euro stood at $1.10778, steady on the day but in retreat since it hit a four-month high of $1.12 on Dec. 13.

The dollar index was at 97.659, flat on the day but maintaining its recovery trend since hitting a five-month low of 96.605 on Dec. 12.

The dollar tumbled to 4.4% on the second trading day of this year as a lack of yen liquidity. It dropped because of the Japanese market holiday, amplified the dollar/yen’s fall sparked by a rare revenue warning from Apple Inc.

The dollar traded at 109.41 against the yen, with minimal change on the day and not far from a six-month high of 109.73 touched earlier this month.

On Friday, data from the U.S. Financial watchdog showed that traders cut their nets short positions in the yen slightly in the week that ended last Tuesday, having increased their bets against currency continually for a few months.

The pound traded at $1.3011, up slightly as it regained some stability after hitting a 2-1/2-week low of $1.2979 on Friday.

It fell 2.6% last week, the biggest weekly fall since October 2016, after U.K. Prime Minister Boris Johnson set December 2020 as a hard deadline to reach a trade agreement.

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