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GBP/USD Exchange Rate Lacks Direction as UK Services PMI Distracts from Looming Election

GBP/USD Exchange Rate Subdued on Soft UK Services PMI

The Pound US Dollar (GBP/USD) exchange rate remained rangebound this morning as markets react to the latest UK services PMI.

At the time of writing the GBP/USD exchange rate is trading at around $1.2903, virtually unchanged from the day’s opening rate.

Pound (GBP) Muted as UK Service Sector Stagnates

The Pound (GBP) is trading in a narrow range this morning following the publication of the UK’s services PMI.

According to data published by IHS Markit, growth in the UK’s dominant service sector stagnated last month, with the index printing at 50.

This was an improvement from the contraction reported in September, but failed to inspire confidence in the UK economy, particularly when viewed alongside manufacturing and construction PMIs.

Chris Williamson, Chief Business Economist at IHS Markit, commented:

‘The UK PMI surveys collectively indicated a further overall decline in private sector output in October.

‘The October reading is historically consistent with GDP declining at a quarterly rate of 0.1%.’

However the index still bested forecasts last month, offering some relief to Sterling amidst ongoing political uncertainty.

Election fever in the UK is expected to get into full swing this week when parliament dissolves on Wednesday.

This will mark the official start of a five-week campaign trail before the 12 December election.

GBP investors will pay close attention to polling numbers in the coming days as each party publishes its election manifesto.

This could lead to a dip in the Pound if Labour can narrow the gap with the Conservatives and increase hung parliament odds.

Robust US Service Sector Reading to Bolster the US Dollar (USD)?

The US Dollar (USD) looks poised to extend its recent rally following the publication of the ISM non-manufacturing PMI later this afternoon.

Economists forecast the index will show growth in the US service sector bounced back last month after slumping to a three-year low in September, with improving US-China trade relations buoying the outlook of firms.

Recent headlines suggest that the two sides are close to striking a preliminary trade agreement, with US Treasury bond yields surging on reports the two sides may even be considering rolling back some tariffs.

This prompted the sharp uptick in the US Dollar at the start of the week, and looks set to underpin USD strength in the coming days.