The Pound to exchange rate slid from a 10-month high last week as a dovish Bank of England policy statement and a sturdy US non-farm payrolls report impacted demand for ‘Cable’.
GBP/USD Strikes 10-Month High
Sterling rallied by around a cent versus the ‘Greenback’ at the start of last week’s session as White House worries and upbeat UK manufacturing bolstered the appeal of the Pound. GBP/USD leaped following a better-than-anticipated manufacturing PMI print of 55.1, which featured the fastest rise in export orders since April 2010.
Meanwhile, demand for the US Dollar remained soft due to concerns that chaos at the White House (following the sacking of President Trump’s media chief Anthony Scaramucci after fewer than 10 days in the job) is making it difficult for Trump to push ahead with his ambitious tax reform and infrastructure spending plans.
UK construction activity decelerated from 54.8 to an 11-month low of 51.9 on Wednesday, but GBP/USD held strong at multi-month highs.
BoE Growth Downgrades Send Sterling Reeling
‘Cable’ depreciated by around -130 pips on Thursday, losing ground as BoE rate hike bets were dealt a blow by a dovish message from the UK central bank. Policymakers voted 6-2 against raising rates in August, while the bank’s GDP forecast for 2017 was downgraded from 1.9% to 1.7% and the 2018 forecast revised down from 1.7% to 1.6%.
Sterling was also hamstrung by talk of Brexit uncertainty, which Governor Mark Carney said was prompting firms to hold back on investment and wage increases.
Pound Plunges again as US NFP Impresses
Sterling suffered additional losses of around -100 pips on Friday when the US non-farm payrolls report printed at 209,000, higher than the median consensus of 180,000.
The upbeat jobs report also featured a dip in unemployment to a 16-year low of 4.3% and a bonus uptick in wage growth to 2.5%. Federal Reserve rate hike bets ticked higher following the sturdy labour market figures.
Week Ahead
‘Cable’ appears set to grapple with psychological support during this week’s session. GBP/USD is currently trading just above a key support line and it will be interesting to see whether the Pound can sustain itself above this level.
Data points such as UK industrial production, which is predicted to have contracted -0.1% in June, and the US consumer price index, which is tipped to have increased from 1.6% to 1.8% in July, could put pressure on GBP/USD.