Pound US Dollar Exchange Rate Plunges on Abysmal UK PMI Release
The Pound US Dollar (GBP/USD) exchange rate is retreating this morning, after the UK’s latest services PMI printed well below expectations.
At the time of writing the GBP/USD exchange rate is trading at around $1.2483, down roughly 0.7% from this morning’s opening levels.
Pound (GBP) Tumbles on Alarming Slump in Service Sector Growth
The Pound (GBP) have plunged this morning after the UK’s latest PMIs printed well below expectations.
According to preliminary data published by S&P Global, the UK’s services index came in at just 51.8 this month. This was down from 58.9 in April and well below a forecast drop to 57.
Given the service sector accounts for roughly 80% of the UK’s economic growth, May’s figures make for alarming reading.
Most worrying is that analysts warn the worst is yet to come. Reigniting fears the UK could be headed towards a recession.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commented:
‘The UK PMI survey data signal a severe slowing in the rate of economic growth in May, with forward-looking indicators hinting that worse is to come.
‘Companies cite increasingly cautious moods among households and business customers, linked to the cost-of-living crisis, Brexit, rising interest rates, China’s lockdowns and the war in Ukraine.
‘The latest data indicate a heightened risk of the economy falling into recession as the Bank of England fights to control inflation.’
US Dollar (USD) Muted in Mixed Trade
The US Dollar (USD) is trading without any strong directional bias this morning, with the currency licking its wounds following yesterday’s slump.
The limited movement in the US Dollar comes amid a mixed market mood. While equity markets remain in the red, a sense of optimism appears to be prevailing.
Further capping demand for the ‘Greenback’ is a modest fall in US Treasury yields. USD investors remain split on whether the Federal Reserve is likely to accelerate its current tightening cycle.
The Fed pushed back against calls for a 75 basis point hike at its latest policy meeting. However the odds of a more aggressive hike from the US central bank continues to grow.
Pound US Dollar Forecast: Fed Powell in the Spotlight
A speech by Federal Reserve Chair Jerome Powell also looks to influence the Pound US Dollar exchange rate later today.
Powell is scheduled to speak at 16:20 GMT. USD investors will be looking for any fresh hints as to the Fed’s monetary tightening plans. A hawkish outlook from Powell could bolster bets for a 75bps hike in the coming months.
Meanwhile, the direction of the GBP/USD exchange rate also looks to be driven by UK political developments.
Boris Johnson is facing fresh questions over his role in the ‘partygate’ scandal, following the emergence of new photos.
Alongside the imminent release of the Sue Gray report into lockdown breaches at No 10, this could raise fresh concern over the future of Johnson’s premiership.