Pound US Dollar (GBP/USD) Exchange Rate Narrows amid Renewed Recession Fears
(Article updated 8:45, 6/4/23) The Pound US Dollar (GBP/USD) exchange rate is trading in narrow bounds this morning. Overnight, the US Dollar saw a modest recovery following downbeat data releases.
The ISM non-manufacturing index for March pointed to slowdown in the US economy, which in turn prompted recession anxieties. As such, the global market mood began to sour, bringing safe-haven flows to the ‘Greenback’.
Thus far this morning, GBP/USD appears to be consolidating this. At the time of writing, Cable is trading at around US$1.2471, showing little movement from today’s opening rates.
Original article continues below:
Pound US Dollar (GBP/USD) Exchange Rate Narrows following Signs of US Economic Cooldown
The Pound US Dollar exchange rate is trading narrowly this morning, as signs of the US economy slowing down mutes USD.
At the time of writing, GBP/USD is trading at around US$1.2491, showing minimal movement from the morning’s opening rates.
US Dollar (USD) Muted amid Signs of US Labour Cooldown
The US Dollar (USD) is seeing muted trade this morning, following yesterday evening’s dismal job data.
The JOLTs jobs openings for February fell by around 630,000 – significantly more than expected by economists. As such, anxiety over apparent cooldown in the US economy is serving to keep the ‘Greenback’ muted this morning.
On top of this, investor bets on further rate hikes from the Federal Reserve are declining. Francesco Pesole, FX Strategist at ING, commented:
‘The implied probability of a May rate hike dropped from 65% to 47% after the release. We think this is a testament to how Fed expectations remain highly volatile – in our view, due to the Fed’s unclear communication.’
However, a more cautious market mood is likely cushioning USD this morning. As such, the ‘Greenback’ could be enjoying modest safe-haven flows.
Pound (GBP) Lacks Direction amid Continual Data Drought
The Pound (GBP) is lacking support this morning, as the data drought continues. As such, without clear stimulus for movement, Sterling is continuing to largely trade without direction.
However, an upbeat print from the final service sector index for March may be further underpinning Sterling. Coming in at 52.9, above the preliminary reading of 52.8, the sector remains firmly in growth.
Tim Moore, the Economics Director at S&P Global Market Intelligence, commented:
‘March data confirmed that the UK service sector returned to growth during the first quarter of 2023, supported by a sustained rebound in new orders as business and consumer confidence improved from the lows seen last autumn.’
Furthermore, recent optimism towards the UK economy may be keeping Sterling afloat. Alongside this, rate hike expectations appear to be on the rise.
GBP/USD Exchange Rate Forecast: US Data Takes the Stage
Looking ahead for the US Dollar, this afternoon’s key data releases are likely to provide some direction. Chiefly, ISM’s service sector index for March could bolster the ‘Greenback’.
The index is forecast to remain in growth territory at 54.5. If this holds, it may negate indications of a slowdown if the accompanying data is upbeat.
On Friday, the non farm payrolls data for march is due to print. Following on from the recent JOLTs data, the forecasted fall could weigh on USD. The US labour market appears to be showing signs of cooling, which could bring pared back rate hike bets.
For the Pound, data releases are thin on the ground through to the week’s early finish on Friday. Because of this, domestic and external factors are likely to be the chief drivers of movement.