Pound US Dollar (GBP/USD) Exchange Rate Dips amid Mixed US Data
Article updated 16:30, 5/12/23:
The Pound US Dollar (GBP/USD) exchange rate is weakening this afternoon, as the latest US ISM services index and JOLTs job openings painted a mixed picture.
While the ISM index for November printed above forecasts at 52.7, job openings fell substantially to 8.733 million. While signs of weakness in the US jobs market restricted the US Dollar’s gains, the index recovered from a five-month low, indicating economic resilience.
Anthony Nieves, Chair of the ISM, commented:
‘The services sector had a slight uptick in growth in November, attributed to the increase in business activity and slight employment growth. Respondents’ comments vary by both company and industry. There is continuing concern about inflation, interest rates and geopolitical events. Rising labor costs and labor constraints remain employment-related challenges.’
Elsewhere, the market mood has soured over the course of today’s session. This is bringing further headwinds to the increasingly risk-sensitive Pound.
At the time of writing, GBP/USD is trading at around US$1.2596, a fall of just over 0.3% from the morning’s opening rates.
Original article continues below:
Pound US Dollar (GBP/USD) Exchange Rate Flat despite Upbeat UK Services Index
The Pound US Dollar (GBP/USD) exchange rate is narrowing this morning, despite an upward revision to the UK’s service PMI.
At the time of writing, GBP/USD is trading at around US$1.2630, showing little movement from the morning’s opening rates.
Pound (GBP) Supported by Confirmation of Service Sector Growth
This morning, the Pound (GBP) is being underpinned by an upward revision to the final service PMI reading for November.
The index printed at 50.9, up from the flash estimate of 50.5, confirming signs of life in the vital sector after months of contraction.
Tim Moore, Economics Director at S&P Global Market Intelligence, commented:
‘UK service providers moved back into expansion mode during November as stabilising demand conditions helped to lift business activity from its recent malaise. Although only marginal, the upturn in service sector output was the fastest since July and slightly stronger than the earlier ‘flash’ estimate for November.’
Additionally, a modest recovery in risk appetite may be serving to further cushion Sterling. As an increasingly risk-sensitive currency, the shifting mood could serve to lift GBP exchange rates over the session.
US Dollar (USD) Calm Ahead of Afternoon Data
The US Dollar (USD) is trading quietly this morning, as investors await impactful data releases this afternoon.
The latest ISM services PMI is due to print, reflecting November’s activity, with economists anticipating an expansion. If the vital sector has grown, it could boost the US Dollar by suggesting resilient economic activity.
This could, in turn, lead to investors paring back their bets on interest rate cuts from the Federal Reserve, likely boosting USD.
However, these gains could be offset if the latest JOLTs job openings data prints as forecast. In October, economists anticipate the number of job openings to have fallen from 9.553 million to 9.3 million.
If the release aligns with forecasts, signs of slack in the US labour market could weigh heavily on the US Dollar later today.
Pound US Dollar Exchange Rate Forecast: BoE Bailey Speech to Lift Sterling?
Looking ahead for the Pound, the main driver of movement is likely to be a speech from Bank of England (BoE) Governor Andrew Bailey.
Tomorrow, Governor Bailey could lift GBP if he takes a hawkish stance, and keeps the door for future tightening open. However, if he takes a cautious approach, Sterling could weaken against its peers.
Beyond this, an absence of wider data means GBP exchange rates could be left exposed to shifts in risk appetite. As a riskier asset, bearish trade could see the Pound weaken.
For the US Dollar, tomorrow sees the release of the latest ADP employment figures. Economists forecast an increase in employment in November, which could strengthen USD by illustrating a tight labour market.
This is followed on Thursday by the latest initial jobless claims data. An increase in claims is forecast for the week ending December 2nd, which may dent USD exchange rates.