GBP/USD Exchange Rate Falls, But Could Weak US Manufacturing Data Drag Down the ‘Greenback’?
The Pound US Dollar (GBP/USD) exchange rate dipped today, with the pairing currently trading around $1.256.
The US Dollar (USD) rose against the Pound (GBP) despite a slew of negative US economic data this week.
Yesterday saw a massive rise in US jobless claims. As a result, this sparked concern over the American economy as 3.8 million workers lost their jobs in last week alone.
Nick Bunker, the Director of Economic Research at the Indeed Hiring Lab, commented:
‘A number in the low millions may be a relief compared to earlier this month, but it’s objectively a horrifying statistic.’
Furthermore, this week saw the US economy shrink at its fastest rate since the financial crisis in 2008.
Policymakers at America’s central bank said that the coronavirus ‘is causing tremendous human and economic hardship across the United States and around the world’.
Looking ahead, we could see the US Dollar (USD) slump this afternoon if the US ISM Manufacturing PMI for April sinks deeper into contraction territory. The figure is expected to fall from 49.1 to 36.9.
Pound (GBP) Falls as UK Manufacturing PMI Falls Below Forecasts for April
The Pound (GBP) found little solace in Prime Minister Boris Johnson’s announcement that the UK was ‘past the peak’ of the coronavirus.
Meanwhile, today saw the release of the finale UK Markit Manufacturing PMI for April. The figure fell below forecasts and sank deeper into contraction territory from 32.9 to 32.6.
Duncan Brock, the Group Director at the Chartered Institute of Procurement and Supply, commented:
‘Last month’s dismal predictions became a reality in April as the manufacturing sector took an abrupt nosedive into the red with purchasing activity, production and new orders falling at the fastest rates in the near 30-year survey history.’
Consequently, Sterling traders have become increasingly concerned for the British economy going forward, despite promises from the Government to restart the economy next week.
Meanwhile, the Bank of England’s (BoE) spending data indicated a huge fall in consumption. Consequently, some analysts said this is a sure sign of an in-coming recession for the British economy.
GBP/USD Outlook: UK Lockdown Easing Plans in Focus
Looking ahead to next week, US Dollar (USD) investors will be awaiting Monday’s US Factory Orders data. If this confirms forecasts and slumps to -9.5%, then we could see the ‘Greenback’ lose some of its appeal.
Pound (GBP) traders will be looking ahead to Tuesday’s publication of the final Markit Services PMI for April. Nevertheless, with the outlook for Britain’s largest sector expected to darken, we should expect some further volatility for the Pound.
The GBP/USD exchange rate could edge higher next week when Downing Street announces its lockdown easing plans. Furthermore, if the UK’s economic outlook begins to brighten – and fast – then we could see Sterling rise.