Pound US Dollar (GBP/USD) Exchange Rate Spirals US PMIs Beat Forecasts

Pound US Dollar (GBP/USD) Exchange Rate Slides amid Upbeat US PMI Data

Article updated 16:00, 24/10/2023:

The Pound US Dollar (GBP/USD) exchange rate is sliding this afternoon, following the publication of the latest US private sector indexes.

Both services and manufacturing PMIs beat forecasts, with both climbing out of contractionary territory. While the service sector reading printed at a flat 50, the recovery still proved to be cheery news for USD investors.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commented:

‘Hopes of a soft landing for the US economy will be encouraged by the improved situation seen in October. The S&P Global PMI survey has been among the most downbeat economic indicators in recent months, so the upturn in US output growth signalled at the start of the fourth quarter is good news.’

At the time of writing, GBP/USD is trading around US$1.2180, a fall of just under 0.6% from today’s morning rates.

Original article continues below:

Pound US Dollar (GBP/USD) Exchange Rate Rangebound amid Further UK Services Contraction

The Pound US Dollar (GBP/USD) exchange rate appears trapped in narrow boundaries this morning, due to mixed UK data releases.

At the time of writing, GBP/USD is trading at around US$1.2239, showing minimal movement from today’s morning rates.

Pound (GBP) Rocked by Mixed Economic Releases

The Pound (GBP) is enduring choppy trade this morning, following a mixed set of economic data releases.

While the UK’s latest labour data showed a fall in August’s unemployment rate to 4.2%, figures indicated slowing hiring. This initially leant some gains to Sterling by indicating some resilience in the labour market.

However, this was offset by October’s preliminary service sector PMI, which printed below forecasts. Coming in at 49.2, down from 49.3, it marked the third consecutive contraction in the vital sector.

Analysts are suggesting this is indicative of an ‘economy skirting recession’, with further weakness anticipated in Q4.

‘The UK economy continued to skirt with recession in October, as the increased cost of living, higher interest rates and falling exports were widely blamed on a third month of falling output. A recession, albeit only mild at present, cannot be ruled out.’

As such, Sterling appears unable to hold onto the initial ground it made at the beginning of Tuesday’s trade.

US Dollar (USD) Mixed amid Light Data Calendar

The US Dollar (USD) is seeing mixed trade this morning, as investors look ahead to the US’ latest private sector indexes.

Due this afternoon, the US services and manufacturing PMIs are expected to show weakness in both sectors activity lessons.

As such, the darkening outlook for the US economy could be undermining the ‘Greenback’ during today’s session.

Furthermore, a shift in risk appetite may be serving to limit the safe-haven US Dollar’s appeal. Israel agreed to delay a ground assault, which may have resulted in renewed hopes for a peaceful resolution to the conflict.

GBP/USD Exchange Rate Forecast: Fed Powell Speech in Focus

Looking further ahead for the US Dollar, the core catalyst of movement is likely to come tomorrow night. Then, Federal Reserve Chair Jerome Powell is due to deliver a speech.

Recent Fed communications have leant dovish, and if Powell follows suit the ‘Greenback’ could weaken amid pared back tightening bets.

However, if he surprises with a hawkish speech and opens the door to future interest rate hikes, USD exchange rates could strengthen.

On Thursday, the latest American GDP data is due to print, reflecting quarterly growth for the third quarter. Economists forecast a significant 4.3% expansion, which may send USD exchange rates soaring.

For the Pound, the data calendar is set to lighten through to the end of the week. Because of this, investors may remain focused on the UK’s economic outlook.

With recent data indicating weakness, Sterling may be unable to gain much ground in the near future.

Elsewhere, risk appetite is likely to play a role in shaping the GBP/USD exchange rate. If trading conditions continue to improve, the Pound could see support due to its increasingly risk-sensitive nature.

John Mulcahey

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