Pound Bounces Back to 1.30 as Britain has a New Prime Minister
The UK pound has begun the day falling further against the US dollar, and currently the GBP/USD is trading at $1.2981, continuing to be the weakest levels it has been against the greenback in 31 years.
The pound climbed back to 1.2981 due to Conservative Party leadership candidate Andrea Leadsom pulling out of the race, clearing the way for Theresa May to be inserted as Britain’s next prime minister.
The dollar has been strengthened further by the better than expected employment figures that were released on Friday, where 287,000 more jobs have been created in the US economy, even though the unemployment rate slightly increased to 4.9%.
In their daily report LMAX Exchange said that the pound only received a minor distraction from the US employment figures , though ultimately mixed messages from the data left the major pair trading mostly sideways, and consolidating of recent multi-year lows.
They also predict that there will be positioning over this week’s Bank of England (BOE) policy decision on Thursday, as many expect the Brexit vote will already push the BOE into further rate cuts later this week, which has the capacity to keep the pound weighed down over the coming days.
According to a Bloomberg survey, 30 out of 54 economists expect an interest rate cut of 25 basis points this week, additionally, six experts expect more aggressive cuts and the remainder expect rates to be on hold.
While FC Exchange said that the sterling sell-off continued last week, with the new lows of 1.2778 Interbank (IB) providing the immediate support, having seen a bounce and some stability above this level, as we hover just below the 1.30 (IB) mark, they would expect to see resistance at 1.30 (IB) initially, followed by 1.3112 (IB) as the next significant low point.
The pound has also started the day falling against the euro, and the GBP/EUR exchange rate dipped to 1.166 euros, before bouncing back slightly to buying $1.168 this morning GMT.
Business Investment Rate up to 22.2% in the Euro Area
Eurostat figures has found that business investment has risen slightly in the euro area to 22.2% in the first quarter this year, compared with 22% in the previous quarter, also the business profit share in the euro area was 40.1% in the first quarter of 2016, stable when compared with the fourth quarter of 2015.
The investment rate has gradually increased since the first three months of 2013, but is still down from the levels pre the 2008 financial crash, where the levels of spending was 24%, while profit share has been higher since the final quarter of 2012, it has not matched the 43% levels that were recorded before the banking meltdown.
Also, the household saving rate in the euro area was 12.9% in the first quarter of 2016 according to Eurostat, stable compared with the final quarter of last year, while the household investment rate in the euro area was 8.5% in the first quarter of 2016, also stable compared with the previous quarter.