Pound US dollar exchange rate weakens amid robust US data
Article updated 15:55, 21/6/2024:
The pound US dollar (GBP/USD) exchange rate is weakening this afternoon, following a robust slate of US preliminary PMIs.
In June, both US manufacturing and service sector indexes printed above forecasts, and reflected expansion in the sectors.
The services index hit a 26-month high of 55.1, above a reading of 54.8 in May. Similarly, the manufacturing PMI hit a three month high of 51.7, up from 51.3.
Chris Williamson, Chief Business Economist at S&P, commented:
‘The early PMI data signal the fastest economic expansion
for over two years in June, hinting at an encouragingly
robust end to the second quarter while at the same time
inflation pressures have cooled.’
The data is allowing the US dollar (USD) to enjoy support through the tail-end of this week’s session.
At the time of writing, GBP/USD is trading at around US$1.2634, a fall of roughly 0.2% from today’s opening rates.
Original article continues below:
Pound US dollar exchange rate tepid amid mixed UK data
The pound US dollar exchange rate is flat this morning, following a slate of mixed UK economic data.
At the time of writing, GBP/USD is trading at around US$1.2658, showing little movement from the morning’s opening rates.
Pound (GBP) wavers amid variable economic data
The pound (GBP) is enduring muted trade this morning, amid a mixed batch of economic data.
While it enjoyed a brief bounce of support in the wake of the latest UK retail sales data, the preliminary PMIs for June negated this.
In May, retail sales smashed forecasts and printed above expectations, marking a 2.9% increase on a monthly basis. Markets had expected a smaller 1.5% rise, but the clear improvement shows a full recovery from April’s -1.8% reading.
June’s PMIs proved mixed, however. While the UK’s manufacturing index ticked higher to 51.4, the services index fell to 51.2. The readings are indicative of slowing economic activity, and could prompt an underwhelming GDP reading.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commented:
‘Flash PMI survey data for June signal a slowing in the pace of economic growth, indicating that GDP is now growing at a sluggish quarterly rate of just over 0.1%. The slowdown in part reflects uncertainty around the business environment in the lead up to the general election, with many firms seeing a hiatus in decision making pending clarity on various policies.’
US dollar (USD) mixed ahead of PMIs
The US dollar is wavering this morning, as markets anticipate the latest batch of American preliminary PMIs.
While less impactful than the ISM readings, S&P global are due to publish its latest services and manufacturing indexes this afternoon.
In June, both sector indexes are forecast by economists to show slowing economic growth. The manufacturing PMI is expected to edge lower from 51.3 in May to 51, while services is expected to fall from 54.8 to 53.7.
This could weigh on the ‘greenback’ later in the session as it may be indicative of slowing economic activity. With the Federal Reserve aiming for a soft economic landing, it could increase bets of an imminent interest rate cut.
Elsewhere, risk appetite could be keeping the US dollar muted this morning. The market mood is mixed, which may be preventing the safe-haven currency from catching bids.
Pound US dollar exchange rate forecast: CBI data in focus
Looking ahead for the pound, the core catalyst of movement may be the latest industrial trends orders data.
In June, the Confederation of British Industry (CBI) is forecast to publish data that shows an improvement from -33 to -21. However, as this may remain deeply negative, it could undermine Sterling and prompt it to dip against its peers.
For the US dollar, investors may pay close attention to the latest CB consumer confidence data. In June, sentiment is forecast to have edged lower which could undermine USD’s appeal.
As the US economy is largely driven by consumption, signs of deteriorating confidence could prove worrisome for investors.
Elsewhere, risk appetite is likely to play a role in shaping the pairing. As the pound is notably more risk-sensitive than the US dollar, a shift towards upbeat trade could strengthen GBP/USD.