Pound US Dollar (GBP/USD) Slumps under Gloomy Trade
The Pound US Dollar (GBP/USD) exchange rate is losing ground this morning ahead of impactful US data, left vulnerable to risk appetite in the interim.
At the time of writing the GBP/USD exchange rate is trading at around $1.2665, down approximately 0.4% from this morning’s opening rate.
US Dollar (USD) Edges Higher amid Downbeat Trade
The US Dollar (USD) is firming against its more risk-sensitive peers this morning amid a spell of cautious trade.
While US data remains sparse, skittish investors opt for the safe-haven ‘Greenback’ in place of its more risk-sensitive peers, allowing USD to climb against the Pound.
In the wake of last week’s lower-than-expected manufacturing PMI, investors are also looking ahead to the latest US factory data due for release this afternoon, for signs of US economic contraction.
However, economists continue to express that the US economy remains resilient despite last week’s downbeat data releases. Jeffrey Roach, Chief Economist at LPL Financial commented:
‘Despite the emerging signs of a slowdown, investors should know there are opportunities in the markets.’
As such, gloomy markets may keep the ‘Greenback’ afloat throughout today’s session ahead of notable US data.
Pound (GBP) Slumps amid Economic Pessimism
The Pound (GBP) is on the defensive this morning, as a lack of fresh UK data leaves Sterling vulnerable to ongoing economic gloom.
With UK data in short supply, concerns of economic stagnation continue to sour Sterling sentiment today. Despite an increasingly hawkish stance adopted by Bank of England (BoE) policymakers, investors appear reluctant to place any aggressive bets on GBP amid a lack of supporting economic reports.
While the UK remains in a prolonged period of stagnation, analysts continue to express concern over the trajectory of the UK’s economy. Alex Beer, Head of Portfolio Development at the Nuffield Foundation observed:
‘Brexit, Covid-19 and the cost-of-living crisis have tested an economy already under strain, with slow growth and high inequality stymying improvements to the living standards of low-to-middle income Britain.’
As such, GBP may continue to face headwinds for the remainder of Monday’s session, amid speculation that the UK economy remains weak.
Pound US Dollar Exchange Rate Forecast: US Jobs Data in Focus
Looking ahead, US JOLTS job openings are due for release on Tuesday. With the number of new US job openings expected to have marginally fallen, further signs of loosening US employment may sink interest rate hike bets, causing USD to slump.
Also due tomorrow in the US is the latest ISM services PMI. Economists expect the index to edge slightly higher in November to 52, up from last month’s 51.8. Further economic expansion within the vital services sector may see USD firm against its peers, while softening USD’s downside from potentially weak employment data.
Looking to the UK, the finalised services PMI is due for release tomorrow. While last week’s preliminary reading came in stronger than forecast, confirmation of significant expansion in the UK’s vital services sector may lift GBP. However, any significant deviations in the finalised index could drive GBP volatility.
In the meantime, a lack of notable data may leave Sterling vulnerable to shifts in risk appetite. A spell of upbeat trade may see the increasingly risk-sensitive Pound may strengthen against its safer peers.