Pound US Dollar (GBP/USD) Exchange Rate Relinquishes Ground
(Updated 16:55, 3/3/23) The Pound US Dollar (GBP/USD) exchange rate rose and fell today as markets responded to the latest service sector data from both the UK and the US.
Pound Sterling (GBP) initially strengthened against the ‘Greenback’ after the UK’s final services PMI beat flash estimates. The latest survey showed strong expansion in Britain’s vital services sector, easing fears of a UK recession.
However, the US Dollar (USD) was able to recoup its losses in the afternoon after US service sector data. The ISM non-manufacturing PMI exceeded forecasts, showing only a modest slowdown in activity. Economists had expected the survey score to drop from 55.2 to 54.5. Instead, it printed at 55.1.
The latest data indicates ongoing strength in the US economy, and this lent the ‘Greenback’ some support.
Original article continues below:
Pound US Dollar (GBP/USD) Exchange Rate Rallies on Upbeat UK Data
The Pound US Dollar (GBP/USD) exchange rate climbed this morning as an upbeat market mood and positive UK economic data lifted the currency pairing.
At the time of writing, GBP/USD is trading at around $1.1996, up around 0.4% from today’s opening levels.
Pound (GBP) Firms on Strong PMI
The Pound (GBP) strengthened against the US Dollar (USD) this morning after the UK’s finalised services PMI printed higher than preliminary estimates.
The flash PMI had exceeded forecasts when it was published, unexpectedly revealing that the UK’s vital services sector – which accounts for around 80% of the country’s total economic output – had returned to growth, with the score hitting an eight-month high.
Today’s final report showed that the sector was even stronger, with the score revised up from 53.3 to 53.5.
🇬🇧The #UK service sector gained considerable momentum, with business activity and incoming new work both expanding for the first time since August 2022 (headline #PMI at 53.5; Jan: 48.7). Input cost inflation fell to its lowest since June 2021. Read more: https://t.co/dyrtXAp4VT pic.twitter.com/EdkXaHM75y
— S&P Global PMI™ (@SPGlobalPMI) March 3, 2023
Dr John Glen, Chief Economist at the Chartered Institute of Procurement and Supply (CIPS), commented:
‘Spring fever gripped the services sector early last month as supply chain managers reported a big leap in activity and the first improvement for half a year.
‘Companies enjoyed renewed customer confidence with the highest level of new orders in nine months. Improvements in the global marketplace made the wheels of activity turn a little faster and levels of export business rose for the third month in a row’.
US Dollar (USD) Slips amid Upbeat Trade
Meanwhile, the safe-haven US Dollar is struggling for support amid a risk-on market mood.
Asian markets rallied overnight after China’s latest services PMI exceeded forecasts. With the world’s second-largest economy on the road to recovery, optimistic traders sought riskier investments. This upbeat mood has carried through into European trade.
Also weighing on the ‘Greenback’, US Treasury yields are retreating. The yield on the US ten-year Treasury note fell sharply this morning, dragging USD down with it.
GBP/USD Exchange Rate Forecast: Could Sterling Continue to Climb?
Looking ahead, the US service sector PMI is due out this afternoon. The influential ISM survey is forecast to show a marginal slowdown in service sector activity last month, although the expected score is still strong.
If the PMI prints as expected, the US Dollar could face some selling pressure. A slowdown in services activity would indicate a cooling of the US economy, and potentially dampen Federal Reserve interest rate rise bets.
Late afternoon and into the evening we have some speeches from Fed officials. If policymakers at the US central bank advocate further rate rises, the ‘Greenback’ could recover.
As for the Pound, there’s a lack of economic data through the remainder of the day. Therefore, risk appetite could continue to affect the riskier GBP’s movement against the safer USD.