Pound US Dollar (GBP/USD) Exchange Rate Licks Wounds amid Surprise US PMI Slowdown
Article updated 16:31, 23/8/23:
The Pound US Dollar (GBP/USD) exchange rate is licking its wounds this afternoon, following the release of the latest US private sector indexes.
While nowhere near the dismal performance of the UK readings, both manufacturing and service sectors slowed more than thought. Because of this, USD investors began to shift away from the ‘Greenback’, as they appeared to cheer the market mood.
As such, the increasingly risk-sensitive Pound was able to reclaim some of its sharp losses from earlier in the day, but is still remaining low against USD.
At the time of writing, GBP/USD is trading at around US$1.2705, a fall of just over 0.2% from the morning’s opening rates.
Original article continues below:
Pound US Dollar (GBP/USD) Exchange Rate Nears Monthly Lows amid Dire UK PMIs
The Pound US Dollar (GBP/USD) exchange rate is falling this morning, following the release of the latest UK private sector indexes.
At the time of writing, GBP/USD is trading at around US$1.2634, falling by just under 0.8% from the morning’s opening rates.
Pound (GBP) Crashes on Shock Private Sector Slowdown
The Pound (GBP) is crumbling this morning, following the release of the latest UK private sector indexes.
In August, the UK manufacturing and service sectors both weakened more than forecast, with the latter slipping into contractionary territory.
Forecasts were for the service sector to print at 51, down from 51.5, whereas it printed at 48.7. This indicates significant slowdown in the key sector, sparking recession anxieties.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commented:
‘The early PMI survey for August suggests that inflation should moderate further in the months ahead, but also indicates that the fight against inflation is carrying a heavy cost in terms of heightened recession risks.
A renewed contraction of the economy already looks inevitable, as an increasingly severe manufacturing downturn is accompanied by a further faltering of the service sector’s spring revival.’
The downturn, discounting falls during the pandemic, are the steepest since the 2008 financial crisis.
With this in mind, Sterling is falling to a near monthly low against the US Dollar (USD) as the UK economic outlook darkens once again.
US Dollar (USD) Trades Calmly Ahead of Afternoon PMI Releases
The US Dollar is seeing support this morning, as markets await the upcoming PMI releases for the US private sector.
A mixed picture is expected for August’s activity, with the service index forecast to edge down to 52.2 from 52.3. However, the manufacturing PMI is expected to increase to 49.3, reflecting a modest improvement. The muddled data may do little to cheer USD investors, but lack of a slowdown may be enough to push the ‘Greenback’ higher.
Elsewhere, USD investors are likely turning their attention towards Friday, when Federal Reserve Chair Jerome Powell is due to speak. As the keynote speech at the Jackson Hole symposium, investors will be hopeful for further clues regarding the direction of US monetary policy.
However, if Powell reiterates the Fed’s data driven approach, the ‘Greenback’ could weaken as rate hike bets become pared back.
Pound US Dollar Exchange Rate Forecast: UK Retail Weakness to Dent GBP?
Looking ahead for the Pound, tomorrow brings the release of the latest distributive trades data from the Confederation of British Industry (CBI).
Economists anticipate a sharp fall in the index, with August’s retail sales falling to -32 from -25. If this prints accurately, it may weigh heavily on Sterling.
For the US Dollar, the latest initial jobless claims for the week ending August 19th are due tomorrow. Economists forecast that claims increased from 239,000 to 240,000. This could weaken USD by indicating slack in the US labour market.