GBP/USD Exchange Rate Stabilises as UK Services Sector Activity Strikes Eight-Month High
UPDATE: The Pound US Dollar (GBP/USD) exchange rate is trading in a narrow range this morning as Sterling consolidates Tuesday’s gains following a better-than-expected UK Services PMI.
The jump started a marked upswing in Sterling sentiment this morning as many analysts speculated that the strong end to the second quarter would help to bolster the chances of an August rate hike from the Bank of England (BoE)
At the same time movement in the US Dollar is limited this morning, with the Independence Day holiday in the US as well as growing trade uncertainty leading many investors to hold their positions in USD.
GBP/USD Exchange Rate Rallies on Upbeat UK Construction Data
UPDATE: The Pound US Dollar (GBP/USD) exchange rate is trending higher on Tuesday morning, rebounding from heavy losses on Monday as markets welcome the release of the UK’s latest construction PMI.
Sterling sentiment is strengthening as IHS Market reported the UK’s construction index climbed from 52.5 to 53.1 in June, the construction sectors fastest pace of expansion in seven months.
Meanwhile the US Dollar appears to be a little more subdued this morning, with a lull in trade war headlines prompting USD investors to brace for some high impact US later in the week.
Greenback Roars Ahead of Pound (GBP/USD) as US Manufacturing PMI Beats Expectations
UPDATE 15:35 BST: The Pound US Dollar (GBP/USD) exchange rate losses now stand at 0.75%, with the ‘Greenback’ pushing even further ahead after the US manufacturing PMI soared past expectations to reach a new four-month high.
GBP/USD Exchange Rate Slides as Trade Fears Bolster Safe-Haven Demand
UPDATE 13:13 BST: The Pound US Dollar (GBP/USD) exchange rate continued to extend its losses on Monday afternoon as markets become increasingly concerned over the possibility of a US led trade war.
This has seen the GBP/USD exchange rate fall 0.5%, or over half a cent in trade in today’s session, possibly putting the pairing on track to strike a new multi-month low later in the week.
The release of the latest US manufacturing PMI figures could also see the gains in the US Dollar accelerate later this afternoon should they indicate activity in US factories continued to grow at a robust pace in June.
Pound US Dollar (GBP/USD) Exchange Rate Tumbles on Trade War Fears
The Pound US Dollar (GBP/USD) exchange rate slumped through the first half of last week’s session, with markets flocking to USD in the face of growing trade war fears.
Meanwhile, demand for Pound Sterling tumbled early in the week amid rising Brexit uncertainty.
However, the second half of the week brought some respite for the GBP/USD exchange rate, with the pairing rallying by two cents as each country published their final GDP readings for the first quarter.
This saw the US Dollar (USD) edge lower as the final US reading saw growth coming in below expectations, while Sterling jumped as UK growth was revised up from 0.1% to 0.2%, helping to bolster expectations of a Bank of England (BoE) rate hike later in the summer.
Pound Sterling (GBP) Exchange Rates Slide on ‘Subdued’ Manufacturing Activity
But the Pound US Dollar (GBP/USD) exchange rate has started this week on the back foot, with Sterling failing to get much support from the UK’s latest manufacturing PMI.
According to the report from IHS Markit, activity in the UK’s manufacturing sector remained steady in June, with the index coming in at 54.4, just beating forecasts that it would slip to 54.
The better-than-expected figures failed to lift the Pound (GBP) however, with analysts suggesting that today’s data is further evidence of the sector being stuck in the doldrums.
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply said:
‘A gentle hush descended over the sector in June as growth of new orders was amongst the lowest in 18 months and the almost imperceptible rise in manufacturing output was more about housekeeping and clearing up backlogs than tackling new business.’
US Dollar (USD) Surges as Trade War Fears Drive Safe Haven Demand
At the same time, the US Dollar (USD) has opened the week on the offensive, with its gains being driven by trade war fears once again.
This latest escalation in trade concerns comes as US President Donald Trump, not content with stoking tensions with China, appears to be taking aim at the EU and its ‘unfair’ trade relationship with the US.
Trump said in an interview on Sunday:
‘The EU is possibly as bad as China, just smaller. It is terrible what they do to us.’
Trump’s comments have raised fears that Washington may look to impose further tariffs on EU imports, with EU car exports being a possible target.
GBP/USD Exchange Rate Forecast: US Labour Figures to Bolster USD?
Looking ahead a slew of US data is likely to prompt some significant movement in the GBP/USD exchange rate this week.
The most notable of which will be the latest US payroll figures, with the US Dollar (USD) potentially striking a new high should the US workforce have continued to expand at a brisk pace last month.
In the meantime the UK will publish the remainder of June’s PMI figures over the next couple of days, with forecasts of a subdued reading from both the construction and services sectors unlikely to inspire gains in the Pound (GBP) exchange rate.