Pound US Dollar (GBP/USD) Exchange Rate Wavers amid Shifting Market Mood
The Pound US Dollar (GBP/USD) exchange rate is wavering this morning, as a shifting market mood keeps Sterling in flux.
At the time of writing, GBP/USD is trading at around US$1.2775, showing little movement from the morning’s opening rates. However, GBP/USD did briefly touch the US$1.28 mark earlier in the session.
Pound (GBP) Trims Gains amid Falling Manufacturing Output
The Pound (GBP) is seeing its gains undermined this morning, following the release of the Confederation of British Industry’s (CBI) industrial trends data.
The CBI found that manufacturing output fell in the three months to August in the fastest rate in almost three years. They further found that 15 out of 17 manufacturing sub-sectors saw a drop in output.
Martin Sartorius, Economist for CBI, commented:
‘With output volumes contracting at their fastest pace since the Covid-19 pandemic, and order books deteriorating, this survey makes for gloomy reading. However, easing price pressures will bring some relief to many manufacturing firms and the broader economy.’
However, Sterling is still able to gain ground against some peers due to the upbeat market mood. As an increasingly risk-sensitive currency, the Pound is able to garner additional support amid risk-on trade.
Elsewhere, continued bets on further tightening from the Bank of England (BoE) may contribute to Sterling’s strength this morning. The BoE are widely expected to pursue a 25bps rate hike in September, as they move to battle high levels of inflation.
US Dollar (USD) Muted amid Cheery Market Mood
The US Dollar (USD) is struggling to attract support this morning, as the market mood appears to improve.
As a safe-haven currency, the ‘Greenback’ is unlikely to garner much attention while investors look to riskier assets.
Furthermore, investors are likely shifting their attention towards the imminent Jackson Hole symposium, in lieu of impactful data.
Because of this, the ‘Greenback’ may remain muted through today’s session. Chris Turner, Global Head of Markets and Regional Head of Research for UK & CEE at ING, commented:
‘There is only second-tier US macro data today, but with US Treasury yields continuing to push higher, headwinds to the equity rally are growing, and temporarily parking funds in the dollar paying 5.30% in overnight rates doesn’t seem like a bad idea. Equally, we expect the dollar to stay largely bid into Friday’s Jackson Hole speech from Fed Chair, Jay Powell.’
Pound US Dollar Exchange Rate Forecast: UK PMI Slowdown to Dent Sterling?
Looking ahead for the Pound, tomorrow brings the release of the latest private sector indexes. Both services and manufacturing sectors are forecast to have weakened further other August, which could weigh heavily on Sterling.
Similarly, the latest US indexes are also due tomorrow. However, the manufacturing sector is forecast to have improved, while the service sector is expected to have edged lower.
With this mixed picture, the US Dollar could struggle for direction, but may grind higher amid signs of improvement.
Elsewhere, investors are likely to look ahead to the beginning of the Jackson Hole symposium on Thursday. If any Fed officials indicate further rate hikes, the US Dollar could strengthen.