Pound US Dollar Exchange Rate Muted as Slump in UK Manufacturing Persists

GBP/USD Exchange Rate Subdued on Weak UK PMI Data

The Pound Sterling to US Dollar (GBP/USD) exchange rate is trading on the back foot this morning in reaction to some gloomy UK PMI figures and ongoing domestic political uncertainty.

At the time of writing the GBP/USD exchange rate is trading at around $1.2909, slightly down from this morning’s opening rate.

Pound (GBP) Struggles as UK Manufacturing Slump Extends into Seventh Month

The Pound (GBP) opens this week on unsteady footing in the wake of the UK’s latest manufacturing PMI.

According to data published by IHS Markit, the UK’s factory index slipped from 49.6 to 48.9 in November.

While this beat a preliminary reading of 48.3, the data revealed a worrying drop in employment, with the factory sector slashing jobs at its fastest pace since 2012.

Analysts suggested that Brexit and political uncertainty are continuing to take their toll on the sector.

Rob Dobson, Director at IHS Markit, said:

‘November saw UK manufacturers squeezed between a rock and hard place, as the uncertainty created by a further delay to Brexit was accompanied by growing paralysis ahead of the forthcoming general election.

‘Downturns in output and new orders continued amid a renewed contraction in exports. The pace of job losses also hit a seven-year high as firms sought to reduce overheads in the face of falling sales.’

This political uncertainty is also taking its toll on the Pound this morning, limiting the upside potential in the currency.

Continued Slump in US Manufacturing to Weaken the US Dollar (USD)?

Across the pond, investors are eying the release of the US’ own factory PMI figures today.

This may cause the US Dollar (USD) to retreat later this afternoon as economists forecast the ISM manufacturing PMI will have contracted for the fourth consecutive month in November.

The recent slump in the US factories is fueling some fears about the state of the US economy, with analysts expressing concern that the malaise in the manufacturing sector threatens to spread to other parts of the economy.

GBP/USD Exchange Rate Forecast: UK Politics, US Data Among Key Market Movers this Week

Looking to the week ahead, there will be plenty to keep both GBP and USD investors on their toes this week.

UK politics will continue to act as the main catalyst of movement in the Pound this week, with markets keeping a close eye on how well the Conservatives fare in the polls.

Expect this to soften Sterling sentiment if Labour continues to close the gap, or if Boris Johnson performance in Friday’s leaders’ debate proves disappointing.

Meanwhile for USD investors there will be plenty of US economic data for them to sink their teeth into.

The latest US payroll report is likely to elicit the largest response from the US dollar this week, with another robust expansion in the US workforce likely to be welcomed by USD investors ahead of next week’s Federal Reserve rate decision.

Matthew Andrews

Contact Matthew Andrews