GBP/USD Exchange Rate Slips on Downbeat PMI Release
The Pound US Dollar (GBP/USD) exchange rate is on the back foot this morning, after the UK’s latest manufacturing PMI printed below expectations.
At the time of writing the GBP/USD exchange rate is trading at around $1.3793, down roughly 0.3% from this morning’s opening levels.
Pound (GBP) Stumbles on Weaker-than-Expected Manufacturing PMI
The Pound (GBP) is trending lower against the US Dollar (USD) this morning, in the wake of the UK’s latest PMI release.
According to data published by IHS Markit, the UK’s manufacturing PMI printed at 63.9 in June, down from 65.6 in May and below the 64.2 predicted in last month’s preliminary reading.
The slowdown was mostly attributed to supply-chain issues, with increased input costs also a point of concern.
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, commented:
‘Overall productivity showed some signs of slowing compared to the previous month as snarled supply chains were in danger of seizing up and operating capacity tightened.’
While the index still points to strong growth in the UK’s factory sector, the modest slowing in activity reflected poorly on GBP exchange rates as it tempers expectations for second quarter GDP.
US Dollar (USD) Remains Buoyed by Hawkish Fed Comments
At the same time, the US Dollar (USD) remains buoyed this morning, as the currency continues to receive tailwinds from hawkish comments from a Federal Reserve policymaker late on Wednesday.
Dallas Fed President Robert Kaplan, suggested that the US central bank should start to taper its bond purchases before the end of the year.
Speaking to Bloomberg TV, Kaplan was asked if he agreed with that tapering should start by the end of the year.
‘I would prefer sooner. These purchases are very adept at stimulating demand, but we’ve got plenty of demand. Our problem is supply and these purchases are not very effective when you’ve got a supply issue.
‘I’d be on my front foot in being very ready to take action sooner because I worry about the efficacy and some of the side effects of these purchases.’
The remarks have further bolstered Fed rate expectations, and are likely to underpin USD demand in the coming months.
Pound US Dollar Exchange Rate Forecast: Robust ISM Manufacturing PMI to Strengthen the ‘Greenback?
Still on the docket for today is the publication of the latest ISM manufacturing PMI, which may exert some pressure on the Pound to US Dollar (GBP/USD) exchange rate later this afternoon.
June’s release if expected to report that activity in the US factory sector remained robust, bolstering capping off what is expected to be a strong second quarter for the US economy.
Also of note to USD investors will be the release of last week’s initial jobless claims. Will another drop in new claims extend additional support to the ‘Greenback’?
Meanwhile, in the absence of any notable UK data releases, GBP investors are likely to look to domestic coronavirus statistics to gauge the direction of the Pound on Friday, with the currency likely to take a knock if case numbers continue to rise.