Pound US Dollar (GBP/USD) Exchange Rate Climbs as UK PMI Impresses
The Pound US Dollar (GBP/USD) exchange rate slumped to a six-month low on Tuesday, as economic concerns deepened. This morning, however, the Pound (GBP) enjoyed an uptick as the UK’s service-sector PMI printed above forecasts.
At the time of writing, GBP/USD is trading at $1.2136, having risen by approximately 0.5% in the past 24 hours.
Pound (GBP) Supported by Rising Business Activity
The Pound managed to recoup some of its recent losses, firming against several peers this morning as September’s finalised PMI printed above expectations.
Coming in at 49.3, on the precipice separating expansion from contraction, the data beat forecasts of 47.2. The reading is said to reflect the Bank of England (BoE)’s decision not to hike interest rates further this month.
On the other hand, the release still marked a downturn on August’s reading of 49.5. Activity fell to an eight-month low, confirming a negative trajectory within the services sector: but analysts were more focused upon a change in sentiment.
Tim Moore, economics director at data company S&P Global Market Intelligence, emphasised that companies were becoming more optimistic as inflation showed signs of easing:
‘Positive sentiment was attributed to hopes of a sustained easing of inflationary pressures and a turnaround in customer demand, as well as new product launches and business investment plans.’
Tailwinds are fragile, as ‘worries about elevated borrowing costs and stretched household budgets’ remain; but the data published this morning represents a vital sign of improvement within an otherwise uncertain trading environment.
US Dollar (USD) Retreats ahead of Employment Data
The US Dollar (USD) corrected downwards this morning and remains comparatively subdued ahead of this afternoon’s ADP data release.
The currency has performed well recently, buoyed by a hawkish Federal Reserve and upbeat JOLTs data: the ‘Greenback’ hit an 11-month high against a basket of its peers yesterday, with the 10-year US Bond yield reaching its highest level since 2007.
Nevertheless, the economy is forecast to have added fewer jobs in September than in August. Moreover, relatively dovish rhetoric from the Fed’s Raphael Bostic may have helped to counter bullish USD sentiment.
Bostic said on Tuesday:
‘I am not in a hurry to raise, not in a hurry to reduce either… I am willing to be patient. I don’t think there is an urgency for us to do anything more.’
In addition to ADP employment data, this afternoon will also see the publication of September’s ISM services PMI and factory orders for August. The former is expected to sink lower – though remaining in contraction territory – while factory orders look to have increased.
Conflicting indications of economic strength could leave the US Dollar wavering against its fellow currencies.
GBP/USD Exchange Rate Forecast: Trading Limited ahead of Key Data
Until this afternoon’s US data is released, the Pound US Dollar exchange rate is unlikely to trend significantly in either direction. Investors are waiting for indications of growth before placing bullish bets.
Additional US jobs data could influence GBP/USD tomorrow, alongside scheduled speeches from several Fed officials. A lack of significant data elsewhere may lead Sterling to trade on construction data and external factors, meanwhile.