GBP/USD Exchange Rate Retreats from Best Levels as US Data Impresses
(Updated: 14:50, 1/11/22) The Pound US Dollar exchange rate has retreated from its best levels this afternoon, following the publication of some stronger-than-expected US data releases.
Both the ISM manufacturing PMI and JOLTs jobs opening came in above forecast.
The manufacturing PMI fell from 50.9 to 50.2 in October. But beat forecasts the index would slide to 50 and signal a stalling of US factory sector growth. Meanwhile the JOLT’s figures reported a surprise rise in job openings in September.
US job openings unexpectedly rose in September, highlighting an enduring tightness in the labor market that risks keeping upward pressure on wages https://t.co/2wvPIJSH5o
— Bloomberg Markets (@markets) November 1, 2022
The surprisingly upbeat data releases eased concerns over a slowdown in the US economy, while also boosting US inflation expectations. This in turn is leading USD investors to rethink expectations the Federal Reserve may take its foot off the accelerator regarding future interest rate hikes.
Original article continues below:
Pound US Dollar Exchange Rate Strengthens ahead of US Data
The Pound US Dollar (GBP/USD) exchange rate is trending higher this morning. The pairing rising as market brace for upcoming US data releases.
At the time of writing the GBP/USD exchange rate is trading at around $1.1539. Up around 0.6% from this morning’s opening levels.
US Dollar (USD) Slips ahead of Key US Data Release
The US Dollar (USD) is on the defensive this morning. With the US currency relinquishing a portion of its gains from the start of the week.
This renewed weakness in the US Dollar comes amid a modest improvement in market risk appetite. In addition to a sense of caution ahead of a couple of key US data releases.
This afternoon will see the publication of the latest ISM manufacturing PMI and JOLTs job openings release.
Economists predict the manufacturing PMI will report a stalling of growth in the US factory last month. While job openings are forecast to have fallen again in September. Downbeat readings for both releases are likely to revive concerns over the trajectory of the US economy.
The releases could also see markets reprice expectations for future interest rate hikes from the Federal Reserve. USD investors fear that any further signs that the US economy is slowing could lead the Fed to slow the pace of its current tightening cycle.
Pound (GBP) Buoyed despite Tax Rise Warning
The Pound (GBP) is enjoying strong gains against the US Dollar and modest gains elsewhere this morning.
The uptick in Sterling sentiment comes as the UK Treasury has offered some insight into what the government’s Autumn Statement may contain.
In warning of a ‘black hole’ in public finances, the Treasury said tax rises and spending cuts are ‘inevitable’.
A source at the Treasury told the BBC:
‘Given the eyewatering size of the fiscal black hole, the PM and the chancellor agreed that tough decisions are needed on tax rises, as well as on spending.’
While a rise in taxes could curb growth and lead to a deeper UK recession, GBP investors appear sanguine. The return to fiscal orthodoxy under Rishi Sunak is seen as a major relief to markets, following the turbulence caused by his predecessor’s fiscal plans.
Pound US Dollar Exchange Rate Forecast: Fed’s Forward Guidance in the Spotlight
Looking ahead, it seems safe to assume the main catalyst of movement in the Pound US Dollar exchange rate in mid-week trade will be the Federal Reserve’s interest rate decision.
With another 75bps hike already priced in the focus for USD investors will be the bank’s forward guidance.
If the Fed confirms the size of future rate hikes could be more modest the US Dollar is likely to weaken.
Meanwhile, movement in the Pound may be limited on Wednesday. GBP investors are likely to make any aggressive bets as they brace for the Bank of England’s own interest rate decision on Thursday.