Pound US Dollar (GBP/USD) exchange rate muted ahead of BoE Pill speech
The Pound US Dollar (GBP/USD) exchange rate is trading flatly today, ahead of a speech from Bank of England (BoE) Chief Economist Huw Pill.
At the time of writing, GBP/USD is trading at around US$1.2624, showing minimal movement from the morning’s opening levels.
Pound (GBP) narrow as investors await BoE speech
The Pound (GBP) is trading in narrow boundaries this morning, as investors await a speech from Bank of England Chief Economist Huw Pill.
Pill is likely to advocate for keeping interest rates unchanged should he comment on monetary policy. Inflation remains elevated in the UK compared to other territories, despite a bleak economic outlook.
If he convincingly argues for keeping rates held, the Pound could gain ground later today amid pushed back rate cut expectations.
Additionally, Sterling is likely being underpinned this morning by an upward revision to February’s manufacturing PMI. The final print was revised higher to 47.5, a ten-month high for the reading.
This may be adding further fire to speculation that it is too soon for the BoE to cut rates, amid elevated cost pressures.
Rob Dobson, Director at S&P, commented:
‘Although the supply impact and effect of prices is muted by standards seen at the height of the pandemic, any upward pressure on inflation will be a concern to policymakers and may add to calls that it is too early to be confident on the timing of interest rate cuts’
US Dollar (USD) muted amid upbeat trade
The US Dollar (USD) is wavering this morning, as markets await impactful data later in the session.
February’s ISM manufacturing PMI is due to print this afternoon, and is forecast by economists to show improving activity. The reading is expected to rise from 49.1 to 49.5, but this could weigh on the ‘Greenback’ by demonstrating continued contraction in the sector.
Francesco Pesole, FX Strategist at ING, commented:
‘Given the index has been in contraction for a very long time, downside surprises may not have the same impact as a rebound to 50+. So, there are some upside risks for the dollar today.’
However, due to a bullish market mood, the safe-haven ‘Greenback’ is struggling to find its footing so far this morning.
This is likely due to an above-forecast improvement in the latest Caixin manufacturing PMI. China’s manufacturing sector grew more than expected in February, showing that its recovery could be finding its footing.
Pound US Dollar exchange rate forecast: US services PMI in focus
Looking ahead to early next week for the US Dollar, Tuesday brings the release of the latest ISM services PMI.
In February, activity in the vital sector is forecast to have slowed modestly, from 53.4 to 53.3. If this prints accurately, USD gains may be softened despite it reflecting growth in the key sector.
For the Pound, data releases are scarce at the beginning of next week. However, the final services PMI for February could bring some support if it confirms an expansion in the sector.
Elsewhere, risk appetite is likely to play a role in shaping GBP/USD. If bullish trading conditions occur, the increasingly risk-sensitive Pound could gain ground over the safe-haven US Dollar.