Pound US Dollar (GBP/USD) exchange rate soars on better-than-expected UK PMI
The Pound US Dollar (GBP/USD) exchange rate leapt higher this morning, as UK PMI data printed above market expectations.
At the time of writing the GBP/USD exchange rate is trading at around $1.2764, up almost 0.6% from this morning’s opening rate.
Pound (GBP) climbs on upbeat PMIs
The Pound (GBP) is strengthening this morning following the release of some better-than-expected UK PMI data.
The UK’s services PMI rose to 53.8 in January, up from 53.4 in December, and above market predictions of 53.2, recording the highest level of growth in the services sector in eight months.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commented:
‘UK business activity growth accelerated for a third straight month in January, according to early PMI survey data, marking a promising start to the year. The survey data point to the economy growing at a quarterly rate of 0.2% after a flat fourth quarter, therefore skirting recession and showing signs of renewed momentum.’
Meanwhile, the UK manufacturing PMI came in above expectations for January and rose to a nine-month high, coming in at 47.3. However, manufacturing is still firmly in contraction territory.
Commenting on contracting UK manufacturing, the PMI explains:
‘Supplier delays were overwhelmingly linked to longer international shipping times as vessels rerouted away from the Suez Canal. At the same time, preproduction inventories fell to the greatest extent since last August as safety stocks were depleted.’
Nevertheless, the strong reading for the UK’s vital services sector is pushing the Pound higher.
US Dollar (USD) tumbles amid cheery market mood
The US Dollar (USD) is slumping against the majority of its counterparts this morning, as an increased appetite for risk has swept the markets.
With fresh talk of a ceasefire between Israel and Gaza, and with the UK Prime minister and Foreign Secretary preparing for a trip to the war-torn region, new hopes of a pause in the conflict are cheering markets.
As the conflict in the Middle East spread to the Red Sea, markets became more and more cautious in trade amid fears that the violence would impact the global economy.
However, with a potential ceasefire on the cards and trade disruptions potentially minimised, markets have turned cheerier this morning, ultimately denting the safe-haven ‘Greenbank’.
GBP/USD exchange rate forecast: US GDP to undermine US Dollar?
Looking ahead, the likely catalyst to drive movement in the GBP/USD exchange rate will be the publication of the latest US GDP rate, expected on Thursday.
Forecasters expect US GDP to have cooled in the fourth quarter of 2023, with an expected drop from 4.9% down to 2%.
Should the data match predictions, this may dent the US Dollar as signs of a weakening US economy may boost bets that the Federal Reserve will cut interest rates sooner than expected.
Back across the Atlantic, amid an absence of higher-impact data, GBP investors may cast their eye to the most recent CBI Distributive Trade release, also expected on Thursday.
Coming in at -32 in December, January’s figure is forecast to slightly rise, to -18. Should the figure come in above expectations, this may lend Sterling some modest support in the latter stages of the week.