Pound US dollar (GBP/USD) exchange rate supported by UK manufacturing growth
The Pound US dollar (GBP/USD) exchange rate is wavering today, despite news that the UK’s manufacturing sector returned to growth.
At the time of writing, GBP/USD is trading at around US$1.2562, showing little movement from the morning’s opening levels.
Pound (GBP) supported by surprise manufacturing sector growth
The pound (GBP) is being underpinned today by a better-than-expected final manufacturing PMI print. In March, sector activity was revised upward from 49.9 to 50.3, marking growth in the sector.
This marked the first period of sector growth since July 2022, providing a much-needed boost for the UK’s economic outlook.
Rob Dobson, Director at S&P Global Market Intelligence, commented:
‘The end of the first quarter saw UK manufacturing recover from its recent doldrums. Production and new orders returned to growth, albeit only hesitantly, following year-long downturns, with the main thrust of the expansion coming from stronger domestic demand.’
This marked a notable lift from February’s reading of 47.5, and indicates that the UK’s economy could be on an upswing.
However, a tentative market mood is keeping Sterling unsteady today, due to its increasingly risk-sensitive nature.
US dollar (USD) softens ahead of JOLTs jobs data
The US dollar (USD) is struggling to attract support today, as markets anticipate the latest JOLTs job openings data.
The figures for February are due to print this afternoon, with economists expecting the number of openings to have fallen. This is likely to show the continued reversal of the US labour market’s excessive demand levels which occurred during the pandemic’s height.
As such, the fall may not move USD exchange rates significantly on it’s own, but there is room for a surprise reading.
Chris Turner, Global Head of Markets and Regional Head of Research for UK & CEE at ING, commented that:
‘Markets expect a slightly lower JOLTS job opening figure today, but any sharp slowing in the job vacancy rate would suggest a much better balance in the jobs market and less pressure for higher wages.’
Elsewhere, a mixed market mood is keeping the US dollar on its toes this morning. While some nervousness is keeping USD afloat, the lack of emphatic bearish trade is capping it against riskier peers.
Pound US dollar exchange rate forecast: US ISM services PMI in focus
Looking beyond the afternoon’s jobs data, the core catalyst of movement for the US dollar is likely to be the latest ISM services PMI.
In March, the sector is forecast to have maintained its level of activity, with the index forecast to print at 52.6. This could underpin USD exchange rates by suggesting resilient economic activity in the key sector.
Then, Federal Reserve Chair Jerome Powell is due to deliver a speech in the evening. If Powell continues his recent dovish lean and remains open to interest rate cuts, the US dollar may weaken.
For the pound, impactful data releases are few and far between this week. This could push focus to the final services PMI reading for March. If activity in the key sector slowed as indicated, Sterling could struggle support.
Elsewhere risk appetite is likely to play a role in shaping the GBP/USD exchange rate. As an increasingly risk-sensitive currency, a shift toward bullish trade could life the pound over the US dollar.