Pound US Dollar (GBP/USD) Exchange Rate Steady, UK Manufacturing Remains Mired in Contraction Territory

GBP/USD Exchange Rate Rangebound, UK Economy to See ‘Chilling End’ in Last Quarter?

The Pound US Dollar (GBP/USD) exchange rate held steady at around $1.229 this morning after September’s UK Markit Manufacturing PMI remained mired in contraction territory at 48.3.

Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply, was downbeat:

‘Brexit combined with a slowdown in the global economy, rising trade tensions and potential oil supply difficulties in the Middle East, means we’re likely to see a chilling end to the last quarter as Halloween approaches.’

As a result, Sterling failed to gain on the US Dollar today, with Brexit weighing on the British economy. UK markets, meanwhile, remain hopeful for a UK-EU breakthrough as we enter the last 30 days before the Brexit deadline.

However, Prime Minister Boris Johnson refuses to rule out the possibility of a no-deal Brexit, despite new legislation designed to prevent a disorderly exit. Fears that UK-EU negotiations may be deadlocked have increased following Ireland’s response to a leaked ‘customs clearance sites’ border plan.

The GBP/USD exchange rate remained muted today, with the Conservative Government expected to provide a workable alternative to the Irish backstop in the coming weeks.

USD/GBP Exchange Rate Holds Steady, US Markets Brace for ISM Manufacturing Survey

The US Dollar (USD) is rangebound against the Pound ahead of today’s ISM manufacturing survey for September, which is expected to emerge from contraction territory. Consequently, we could see the ‘Greenback’ start to edge higher against Sterling this afternoon.

However, USD traders remain cautious after August’s US manufacturing PMI dropped below 50 for the first time in three years.

Today will also see a speech by James Bullard, the President of the Federal Reserve Bank of St Louis. Any dovish comments about the US economy could clip the USD/GBP exchange rate.

Meanwhile, US-China trade uncertainty continues to weigh on market confidence in the US economy.

Ian Bremmer, President of Eurasia Group, New York, stated that the trade war between the two superpowers has gotten ‘considerably worse’, reducing hopes that a trade deal may emerge from this month’s Washington negotiations.

GBP/USD Outlook: Brexit Developments to Remain in Focus

Sterling traders will be looking ahead to tomorrow’s Markit construction PMI for September, which is expected to remain steady at 45.

Tomorrow will also see the release of the UK year-on-year BRC shop price index for August.

Meanwhile, US Dollar investors will be bracing for Wednesday’s ADP employment change figure for September, which is expected to ease from 195 thousand to 140 thousand.

Brexit will continue to dominate The GBP/USD exchange rate, with the Conservative Party expected to honour the terms of the Benn Act and present parliament with a workable UK-EU withdrawal deal ahead of October 19.

David Moore

Contact David Moore