Pound US Dollar (GBP/USD) Exchange Rate Continues to Rise on Disappointing US Data

Pound US Dollar Exchange Rate Extends Gains on Mixed US Data

(Updated 16:30, 01/12/2021) The Pound US Dollar (GBP/USD) exchange rate is continuing to climb this afternoon as US data prints mixed and Bank of England (BoE) Governor Andrew Bailey contemplates the economic effects of Covid.

ADP employment change data in the US revealed a decline in new hires in the month of November, although the figure beat estimates, capping losses. Analysts predicted that 525K people would be hired by private businesses, following 570K hires last month: instead, 534K individuals were employed across the goods and services sectors.

US Markit manufacturing data also revealed a slowdown, with the IHS manufacturing PMI revised lower to 58.3 in November from 58.4 last month. However, the more important ISM data reported expansion for the eighteenth month in a row, edging up to 61.1 as faster increases were seen in production, new orders and employment.

Meanwhile, Sterling sentiment continues to find support on reduced Brexit tensions, alongside comments from Andrew Bailey this afternoon.

The BoE Governor chose his language with care, but avoided a profoundly dovish tone as he conceded that the ‘direct economic effects of Covid have attenuated a lot since [last year’s] fall in GDP’.

Bailey added ‘There are still impacts that we are feeling from Covid quite strongly… services are recovering but we have still got quite a long way to go.’

Compared with the comments of BoE policymaker Catherine Mann, Bailey’s are less likely to trigger bearish trading: Mann remarked yesterday that it was premature to talk about the timing of any rate increases by the central bank as the Omicron variant could reduce consumer confidence, slacken spending and add to supply chain difficulties.

Original article continues below:

GBP/USD Exchange Rate Rises as US Dollar Corrects

The Pound US Dollar (GBP/USD) exchange rate is recovering its losses this morning as investors wait for the release of US employment and manufacturing data later in the day. Pound (GBP) traders await a speech from Bank of England (BoE) governor Andrew Bailey.

At the time of writing, GBP/USD is trading at $1.3323, up 0.2% from today’s opening levels.

Pound (GBP) Recovers from Yearly Low

The Pound (GBP) is trading in a mixed range against its peers today, but has managed to recover from a yearly low against the US Dollar.

Sterling plunged earlier in the week as investors speculated over the effects of the newly-discovered ‘Omicron’ Covid variant: the CME’s BoEWatch Tool showed that those polled no longer expected an imminent rate hike from the UK’s central bank.

Subsequently, reassurance from various health experts helped to temper GBP headwinds, following murmurings of doubtful vaccine efficacy from drug-maker Moderna’s chief executive on Tuesday.

The co-founder of BioNTech – the developer behind the Pfizer vaccine – countered Stéphane Bancel’s downbeat forecast, saying:

‘To my mind there’s no reason to be particularly worried. The only thing that worries me at the moment is the fact that there are people that have not been vaccinated at all.’

Also providing Sterling upside, France appears willing to extend an olive branch concerning the current Brexit-related issue of migration.

According to Bloomberg, France is preparing to offer Boris Johnson proposals for an agreement with the European Union on migration, less than a week after slamming the UK Premier for not taking the issue seriously enough.

US Dollar (USD) Faces Downside on Stronger Risk Sentiment

The US Dollar (USD) enjoyed significant tailwinds yesterday as Federal Reserve Chairman Jerome Powell entertained the idea of faster QE tapering in December.

Speaking to the Senate Committee, Powell said:

‘At this point, the economy is very strong and inflationary pressures are higher, and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases, which we actually announced at the November meeting, perhaps a few months sooner.’

Into today, mixed US data is weighing upon the ‘Greenback’ alongside a stronger market mood. The Chicago business barometer fell to 61.8 in November 2021 from 68.4 the previous month; meanwhile, optimism from BioNTech’s Ugur Sahin and receding virus cases in South Africa are buoying market sentiment.

Pound US Dollar Exchange Rate Forecast: US Employment to Dent USD Further?

Looking ahead, this afternoon’s American employment statistics are likely to influence the Pound US Dollar exchange rate: if new hires fell in November as expected, the ‘Greenback’ may face headwinds.

On the other hand, the ISM manufacturing PMI is forecast to show a slight rise in manufacturing activity, which could cap losses.

A speech from the BoE Governor later in the day may provide the Pound with some trading impetus – a hawkish tone would likely support GBP.

Olivia Evershed

Contact Olivia Evershed


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