GBP/USD Exchange Rate Slumps as US Services PMI Jumps
UPDATE: The Pound Sterling to US Dollar (GBP/USD) exchange rate fell as much as half a cent on Tuesday after the ‘Greenback’ was bolstered by strong pick-up in US service sector growth last month
According to the ISM non-manufacturing PMI US service sector growth struck a three-month high in February, as the index roared from 56.7 to 59.7, boosted by a solid rise in new orders.
Meanwhile Sterling sentiment languished on Tuesday afternoon, with markets steering clear of the UK currency amidst renewed doubts over Brexit.
GBP/USD Exchange Rate Steady Following UK Services PMI
The Pound Sterling to US Dollar (GBP/USD) exchange rate traded in a narrow range this morning, as markets digest the UK’s latest Service PMI figures.
At the time of writing the GBP/USD exchange rate is virtually unchanged, leaving the pairing trading at around $1.3183.
Pound (GBP) Stable as Service Sector Avoids Contraction
The Pound (GBP) is holding its ground against the US Dollar (USD) and the majority of its other peers this morning following the release of the UK’s latest services PMI.
According to data published by IHS Markit, the UK’s dominant service sector saw a modest pick-up in growth last month, with the index climbing from 50.1 to 51.3 and avoiding the contraction to 49.9 that had been forecast by economists.
However while headline growth improved in February, analysts warned that a surge of Brexit preparations masked underlying weakness in the UK private sector, particularly in regards to employment.
Chris Williamson, Chief Business Economist at IHS Markit, said:
‘The latest PMI surveys indicate that the UK economy remained close to stagnation in February, despite a flurry of activity in many sectors ahead of the UK’s scheduled departure from the EU.
‘Employment across services, manufacturing and construction is meanwhile now falling at a rate not exceeded for nine years as companies cut costs and await clarity on the outlook, highlighting the rising damage to the economy from intensifying uncertainty.’
US Dollar (USD) Steady on US-China Trade Deal Optimism
Meanwhile the US Dollar (USD) remained rangebound at the start of today’s session as USD investors take stock of the latest developments in US-China trade talks.
Recent reports suggest that the two powers are close to finalising a deal and that it could be signed by President Trump and President Xi at a summit later this month.
This has helped to reverse some initially losses seen in the US Dollar at the very start of the week after Trump complained about the strength of USD.
‘I want a Dollar that’s great for our country but not a Dollar that’s prohibitive for us to be doing business with other countries.’
GBP/USD Exchange Rate Forecast: Robust PMI Figures to Boost the Greenback?
Coming up later in today’s session, the US will publish its own service sector growth figures, with the Pound US Dollar (GBP/USD) exchange rate likely to fall back if the latest ISM non-manufacturing PMI prints as robustly as expected.
Economists currently forecast that the Services index will have climbed from 56.7 to 57.3 in February, reversing a recent slowdown in growth and likely lending some support to the ‘Greenback’.
Meanwhile the focus for GBP investors this afternoon will be on Mark Carney as the Governor of the Bank of England (BoE) testifies in front of the House of Lords.
Carney is likely to be grilled on the recent slowdown in UK growth and the BoE’s preparations for Brexit, potentially weakening Sterling sentiment is he remains cautious in his economic outlook.