An upward revision to April’s finalised UK manufacturing PMI was not enough to keep the Pound to US Dollar exchange rate from shedding fresh ground.
Last Week: Surge in US GDP Bolstered US Dollar Appeal
Demand for the US Dollar picked up sharply at the end of last week, driven by a better-than-expected first quarter growth rate.
With the quarterly gross domestic product accelerating to 6.4% worries over the outlook of the US economy naturally diminished, with investors betting on the prospect of a stronger 2021 performance.
While the Nationwide housing price index saw an unexpectedly strong improvement in April the mood towards the Pound remained muted ahead of the weekend.
Although the UK housing market showed fresh signs of resilience, with prices jumping 2.1% on the month, this failed to give investors enough incentive to pile back into GBP exchange rates.
Three Things to Watch out for This Week
1. UK Services PMI
However, the GBP/USD exchange rate could find a fresh boost in the days ahead as long as April’s finalised services PMI confirms a sharp uptick for the index.
Evidence of the recovery of the UK service sector may bolster hopes of a stronger second quarter growth performance to come, offering the Pound a boost against its rivals.
2. Bank of England Rate Decision
On the other hand, the Pound could face increased selling pressure as anticipation for the Bank of England’s (BoE) May policy announcement approaches.
Although no change in monetary policy is expected at this stage the Pound may shed further ground if policymakers look set to maintain their dovish policy outlook for the foreseeable future.
3. US Non-Farm Payrolls
Fresh support for the US Dollar may materialise on the back of April’s non-farm payrolls report, meanwhile.
As long as the headline payrolls figure increases as forecast USD exchange rates are likely to hold onto a positive footing, with worries over the outlook of the labour market continuing to diminish.
Anticipation ahead of the Bank of England policy announcement could keep the Pound to US Dollar exchange rate under pressure this week, even if signs point towards greater economic resilience.