The pound fell to two-week lows against the U.S. dollar on yesterday, as expectations for a U.S. rate hike in the coming months continued to lend broad support to the greenback. GBP/USD hit 1.5385 yesterday during European trade, the pair’s lowest since May 8; the pair subsequently consolidated at 1.5415, sliding 0.36%. Cable was likely to find support at 1.5241, the low of May 8 and resistance at 1.5591, the high of May 20. The dollar was boosted after Federal Reserve Chair Janet Yellen reiterated Friday that the bank still expects to start raising interest rates later in the year if the economy continues to improve as expected. She attributed a slowdown in first quarter growth to “transitory factors”, including a harsh winter, but reiterated that the timing of an initial rate hike would be data dependent. Sterling was higher against the euro, with GBP/EUR gaining 0.24% to 1.4140. Sentiment on the single currency remained vulnerable as the prospect of a Greek default continued to weigh.
Yesterday, the euro fell to its lowest level against the dollar in the month of May, as a raft of promising U.S. economic data coincided with continuing fears of a Greek exit from the European Union. EUR/USD fell to an intra-day low of 1.0863, its lowest level since April 28, before slightly rebounding to settle at 1.0879, down 0.0099 or 0.90%. The pair traded in a wide range of 1.0863 and 1.0981 on a choppy day of trading. The euro has fallen against its American counterpart in eight of nine sessions and is down more than 4.75% since reaching a three-month high at 1.11467 on May 15. The Euro zone officials said a group of deputy finance ministers would hold a teleconference tomorrow (Thursday) after the conclusion of several days of talks between Greece and its troika of creditors. Additionally, a senior German official told Reuters there was no reason to believe that Greece would fail to meet a €300 million payment to the International Monetary Fund on June 5. By the end of June, however, Greece owes the IMF three other payments totaling more than €1.262 billion.
Federal Reserve Chair Janet Yellen’s popularity must be soaring among her global central bank peers. The dollar surged against other developed-market currencies, reaching an almost eight-year high versus the yen, since the end of last week when Yellen said she expects to raise interest rates this year for the first time since 2006. By contrast, central banks in Japan and Europe are pursuing currency-depreciating stimulus to spur inflation, while policy makers from Australia to Canada say they want lower exchange rates to bolster economic recovery. “A number of central banks around the world would view the recent strength in the dollar as welcome,” said Greg Gibbs, a strategist at Royal Bank of Scotland Plc in Singapore. September seems the most likely timing for a U.S. rate increase, and the dollar “was ripe for a bit more movement,” he said. More than two dozen central banks have eased monetary policy since October. Australian central bank chief Glenn Stevens labelled further depreciation of the local dollar as both “likely and necessary” on May 5, when the Reserve Bank cut the key rate to a record 2 percent.