GBP/USD Exchange Rate Pressured as Weak US Data Reinforces Risk-Off Mood
(Updated: 16:10, 01/08/23) The Pound US Dollar (GBP/USD) exchange rate is facing fresh selling pressure as we approach the end of the European trading session.
The GBP/USD exchange rate is now around 0.6% down on the day, with the pairing dropping as low as $1.2749.
Underwhelming US data releases have done little to slow the US Dollar’s ascent. July’s ISM manufacturing PMI and June’s job opening figures both printed below forecast.
The #US manufacturing sector signalled a further deterioration in operating conditions during July. However, the downturn softened as the #PMI index rose to a three-month high of 49.0 (Jun: 46.3). Read more: https://t.co/zkmn7b7JOq pic.twitter.com/K1DfIiDVjf
— S&P Global PMI™ (@SPGlobalPMI) August 1, 2023
While the disappointing data undermines Federal Reserve rate hike bets it also feeds into current risk-off sentiment, driving support for the safe-haven US Dollar.
Original article continues below:
GBP/USD Exchange Rate Pressured as GBP Investors Rule Out 50bps Rate Hike
(Updated: 14:15, 01/08/23) The Pound US Dollar (GBP/USD) exchange rate faces additional resistance this afternoon, pulling the pairing below $1.28.
The extended slide in Sterling comes as GBP investors now appear to have completely ruled out the possibility of a 50bps rate hike from the Bank of England (BoE) later this week.
The Bank of England meets on Thursday.
Investors think rates could go to 5.75%, which implies three more 25bp rate hikes. Our formal forecast peaks at 5.5% but we acknowledge this is wholly dependent on further progress on services inflation and wages.https://t.co/f2Hx6IiEVW
— ING Economics (@ING_Economics) July 29, 2023
This comes as recent UK economic data has revived fears the UK is at risk of slipping into a recession.
Elsewhere, the US Dollar is appreciating as an increasingly risk-off mood sees investors favour safe-haven assets.
However markets are bracing for a possible about-turn in GBP/USD with the impending release of today’s US economic data.
Original article continues below:
Pound US Dollar Exchange Rate Muted amid UK Manufacturing Slump
The Pound US Dollar (GBP/USD) exchange rate is subdued this morning, as the UK’s latest manufacturing PMI stokes UK recession fears.
At the time of writing the GBP/USD exchange rate is trading at around $1.2817. Slightly down from this morning’s opening levels.
Pound (GBP) Undermined by UK Recession Fears
The Pound (GBP) faces some resistance this morning amid fresh fears that the UK economy could slip into a recession.
These concerns have resurfaced following the publication of the UK’s latest manufacturing PMI.
While July’s finalised figures beat preliminary estimates, it still reported the factory sector suffered its worst contraction since December.
The #UK followed the #eurozone by posting a steeper downturn in manufacturing activity in July, as rates of contraction in output, new orders and employment all quickened, and the #PMI dropped to 45.3. @cipsnews Read more: https://t.co/uMImCXMuJm pic.twitter.com/oLxaXr7wKq
— S&P Global PMI™ (@SPGlobalPMI) August 1, 2023
GBP investors appeared particularly concerned by the pace at which the manufacturing sector was shedding jobs last month.
Thomas Pugh, UK economist at RSM UK, comments
‘The fall in the manufacturing PMI suggests that momentum and resilience in the private sector are starting to falter and it is not difficult to see the economy slipping into recession in early 2024 as the impact of interest rate hikes continue to feed through into the real economy. Indeed, at 46.8 the employment index suggests that the sector is continuing to shed employees.’
However, the downside in the Pound US Dollar exchange rate remains limited ahead of the Bank of England’s (BoE) impending interest rate decision.
US Dollar (USD) Underpinned by Cautious Trade
The US Dollar (USD) trades with modest gains this morning as a cautious mood prevails. Bolstering demand for the safe-haven ‘Greenback’.
Market sentiment soured overnight with the publication of China’s latest manufacturing PMI.
The Caixin PMI showed China’s factory sector suffered its first contraction in three months as the index fell from 50.5 to 49.2 in July.
The underwhelming figures raise fresh concern over the world’s second largest economy and the potential impact on global growth.
Pound US Dollar Exchange Rate Forecast: Downbeat Data to Weaken USD?
Still to come today are a couple of high-impact US data releases. The latest ISM manufacturing PMI and JOLTs job opening releases will be published this afternoon.
The ISM manufacturing PMI is expected to report the US factory sector continued to contract in July. While the number of jobs openings is expected to have declined again in June.
The underwhelming US data could dampen Federal Reserve interest rate expectations and bolster the Pound US Dollar exchange rate this afternoon.
However, any upside in the Pound is likely to remain limited. GBP investors are likely to remain reluctant to make any aggressive bets ahead of the BoE’s interest rate decision on Thursday.