Service Sector PMI Supports Pound Sterling Exchange Rate Strength
The Pound to US Dollar (GBP/USD) exchange rate struck a three-month high last week as markets turned sour on the US tax bill.
Sterling performed well against the US Dollar at the start of last week’s session as markets sold the ‘Greenback’ on fears that the US tax bill might not have the desired positive impact on 2018 US economic activity.
GBP/USD rose to a three-month high as traders reduced bets for Federal Reserve interest rate hikes, suggesting the tax cuts may not lead to as strong economic, jobs and pay growth as initially expected.
UK manufacturing output slowed from 58.2 to 56.3 and construction activity dipped from 53.1 to 52.2, however, demand for the Pound remained steady thanks to a rise in service sector output from 53.8 to 54.2.
The service sector accounts for over 70% of British GDP and is subsequently seen as the most important of the PMI reports.
GBP/USD Exchange Rate Sturdy as US NFP Report Disappoints
The Pound to US Dollar (GBP/USD) exchange rate was able to strengthen on Friday in reaction to December’s US employment data.
The rate of jobs growth in America slowed from 252,000 to 148,000 in December, according to the latest non-farm payrolls report.
The news dampened demand for the US Dollar but GBP/USD did not register any breakout gains thanks to news that the US unemployment rate had held firm at a 17-year low of 4.1%.
Neutral Outlook for Pound to US Dollar (GBP/USD) Exchange Rate
The main event to keep an eye on this week, in terms of GBP/USD exchange rate movement, is Friday’s US consumer price index report.
The data is anticipated to show that US inflation slowed from 2.2% to 2.1% at the end of 2017.
Anything lower than that could weigh on the ‘Greenback’, as it would decrease 2018 Fed rate hike bets, while anything higher than 2.2% could send the US Dollar higher.