GBP/USD exchange rate tumbles ahead of ISM PMI
The pound US dollar (GBP/USD) exchange rate is weakening today as investors wait for the publication of the latest US manufacturing PMI. In the meantime, UK traders digest the fact of retail growth in the year to August.
At the time of writing, GBP/USD is trading at $1.3135, slightly below yesterday’s opening levels.
Pound (GBP) firms against some of its peers
The pound (GBP) is climbing in several exchange rates today, buoyed by the release of the latest retail sales monitor from the British Retail Consortium (BRC). The monitor increased to 0.8%, from 0.3% in July.
The increase took the monitor to its highest level in 5 months, with analysts attributing sales to warmer weather. Helen Dickinson, chief executive at the BRC, commented:
‘Sales growth picked up in August, particularly for food as people came together to host barbecue and picnic gatherings for family and friends, and for summer clothing and health and beauty products as people prepared for trips away and summer social events.’
Also boosting Sterling morale was Monday’s finalised manufacturing PMI, which expanded to a 26-month high of 52.5 for the month of August. Rob Dobson, Director at S&P Global Market Intelligence, said of the data:
‘The UK manufacturing sector remained a positive contributor to broader economic growth in August… The upturn is broad-based across manufacturing, with the investment goods sector the stand-out performer.’
US dollar (USD) firms ahead of key ISM PMI
The US dollar (USD) is trending higher today: economists expect that manufacturing activity contracted at a slower pace in August, forecasting a reading of 47.5 from July’s 46.8. Analysts at ING assess:
‘The consensus is looking at a modest improvement in August, from 46.8 to 47.5. One sub-index that we are monitoring closely is the ISM Prices Paid… Consensus expectations are for a decline from 52.9 to 52.0, which should feed into the Fed’s and the market’s conviction call on disinflation.’
Markets are also waiting on tenterhooks for Friday’s labour market report, as the Federal Reserve’s monetary policy ahead may depend upon the data. At the Jackson Hole Symposium, Fed Chairman Jerome Powell indicated that the central bank is keen to prevent job demand from climbing.
The JOLTS job openings data for July and August’s ADP employment change release may provide clues as to how Friday’s nonfarm payrolls will print, possibly swaying USD investors in the meantime.
Charu Chanana, head of currency strategy at Saxo, remarks:
‘A weak non-farm payrolls, particularly if it falls below 130,000 with another jump higher in unemployment rate, could push the rates market closer to pricing a 50 bps cut (in September].’
GBP/USD exchange rate forecast: ISM data awaited
The pound US dollar will likely trade within fairly narrow bounds until the release of this afternoon’s US PMI data. Following the publication, traders’ attention may turn toward Friday’s labour market report.
UK data is thin on the ground this week, but tomorrow’s finalised services PMI could trigger GBP movement if it prints above or below the 53.3 forecast. Pound performance has been fairly steady recently as markets are pricing in more gradual monetary policy loosening from the BoE than from other major central banks.