Pound Sterling to US Dollar (GBP/USD) Exchange Rate Hits Fortnight Low on UK Economic Concerns

Pound to US Dollar Exchange Rate Tumbles as UK Services Data Disappoints

UPDATE: While investor demand for safe haven currencies like the US Dollar (USD) remained limited today, the Pound Sterling to US Dollar (GBP/USD) exchange rate continued to slide.

The GBP/USD interbank level hit its worst level in two weeks during Tuesday’s European session, as Pound (GBP) investors sold the currency in reaction to the latest UK services PMI.

Markit’s January UK services report was expected to slip to 51, but instead tumbled to a virtually-stagnant 50.1.

It worsened concerns about the impact Brexit uncertainties and global growth jitters were having on UK economic activity, which kept GBP/USD unappealing.

Pound to US Dollar Exchange Rate Rebounds Slightly as US Data Misses the Mark

UPDATE: For most of Monday’s European session, the Pound Sterling to US Dollar (GBP/USD) exchange rate slipped lower as the Pound (GBP) was unappealing on Brexit jitters and UK data while the US Dollar (USD) benefitted from Friday’s US stats.

Demand for the US Dollar was a little weaker during the American session however, as US factory orders printed at a disappointing -0.6% instead of the predicted 0.2%.

Investors are now highly anticipating tomorrow’s session, when UK services PMI and US non-manufacturing PMI data from January will be published.

Further Pound to US Dollar Exchange Rate Losses Limited Despite Weak UK Construction PMI

UPDATE: While this morning’s disappointing UK construction PMI weighed further on the Pound (GBP), the Pound to US Dollar (GBP/USD) exchange rate’s losses were limited.

UK construction is fairly low influence, so the data had a minimal impact on the Pound outlook.

Meanwhile, investors were hesitant to keep buying the US Dollar (USD) too much ahead of this afternoon’s anticipated US factory report, as last week’s Federal Reserve dovishness weighed.

Pound to US Dollar (GBP/USD) Exchange Rate Keeps Falling as UK Data Disappoints while US Data Impresses

After Brexit uncertainties re-emerged last week and UK data disappointed investors, the Pound Sterling to US Dollar (GBP/USD) exchange rate fell back. The Pound (GBP) remains unappealing on Monday morning as Britain’s latest construction PMI are published.

Limited demand for the US Dollar (USD) has meant GBP/USD only shed around one cent last week, after gaining over four cents in January.

The GBP/USD interbank rate fell from late-January’s three-month-high of $1.3210, but sustained the vast majority of January’s gains.

The primary cause of Pound losses over the past week was concern that a no-deal Brexit was still possible, as well as disappointing UK data in recent sessions.

Demand for the US Dollar has been limited due to a more dovish Federal Reserve, but with US data impressing investors there may be further losses ahead for the Pound to US Dollar exchange rate.

Pound (GBP) Lacks Demand as UK PMIs Continue to Disappoint

Investors have had little reason to buy the Pound (GBP) over the past week. Hopes that a no-deal Brexit can be avoided have run out of steam, as concerns persist.

Amid a lack of progress in the process, no-deal Brexit fears returned last week and dragged Sterling lower again.

The Pound’s appeal was weighed even further at the end of the week, as Britain’s latest manufacturing PMI from Markit fell short of expectations and indicated that the manufacturing sector could be headed towards recession.

Concerns about Britain’s economic outlook have carried over into this week. This morning’s construction PMI from Markit saw the figure fall from 52.8 to just 50.6, rather than the expected 52.4.

This put the figure just above the 50 point mark that separates growth from contraction.

According to Phil Harris, Director at BLP Insurance, activity is unlikely to improve until there is some kind of certainty on Brexit:

‘With two months left until the UK leaves the EU and no clear deal in sight, confidence in the construction sector on several levels is in short supply.’

US Dollar (USD) Exchange Rates Supported by US Job and Manufacturing Stats

The US Dollar (USD) was unable to fully capitalise on Sterling (GBP) weakness last week, as the Federal Reserve took a more dovish tone on the US monetary policy outlook and this dampened market demand for the US currency.

However, at the end of the week the US Dollar saw a surge in demand as the latest US ecostats impressed investors.

January’s US Non-Farm Payroll report showed that while US unemployment had unexpectedly worsened, there was a much stronger than expected jump in new US jobs. The change in NFP figure came in with an impressive 304k.

On top of this, ISM’s US manufacturing PMI from January beat 54.2 expectations and rose to 56.6. The data overall indicated that the US economy remained strong despite the global economic slowdown.

These stats continued to support the US Dollar this morning, helping the currency to hold last week’s gains versus the Pound.

Pound to US Dollar (GBP/USD) Exchange Rate Traders Anticipate Brexit News and Further US Data

Until there is some kind of development in the Brexit process, or UK data that lessens fears of Brexit’s impact on the economy, the Pound to US Dollar (GBP/USD) exchange rate may struggle to advance.

The UK government is hoping to gain some concessions from the EU on the issue of the Irish backstop, but analysts do not expect the government will succeed with any renegotiation attempts.

This is essentially leaving the Brexit outlook unchanged and filled with uncertainties, and markets are awaiting some kind of domestic opinion shift that could change the direction the Brexit process takes next time it is debated in Parliament.

While Pound (GBP) investors are hoping for Brexit developments, Tuesday’s UK services and composite PMIs could offer the British currency a little support if the data beats expectations.

The US Dollar (USD) is likely to be driven by US ecostats in the coming days, with ISM’s non-manufacturing PMI for January tomorrow and November trade stats on Wednesday likely to be particularly influential.

Unless US data is highly disappointing though or there are optimistic Brexit developments, the Pound to US Dollar (GBP/USD) exchange rate is unlikely to rise much in the coming days.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard