The Pound to US Dollar exchange rate was on the back bench today as coronavirus continues to cause investors to buy into the safe-haven USD.
The pair is currently trading around $1.3681.
Pound (GBP) Struggles as Manufacturing PMI Hits 3-Month Low
The Pound found itself losing traction today as a disappointing manufacturing PMI kept Sterling from making any significant gains against the US Dollar (USD).
The data came in at 54.1, a three month low as the manufacturing sector slowed at the beginning of 2021, due to Covid-19 lockdowns and transport delays following on from the end of the Brexit transition period.
Speaking on the data, Rob Dobson, director at IHS Markit said:
‘Whereas many countries are seeing manufacturers provide a much-needed support to economic growth as the service sector is hit by COVID-19, the UK’s manufacturing sector has come close to stalling. A mixture of harsher COVID-19 restrictions and Brexit led to near-record supply-chain disruptions, lower exports and increased costs.’
The Pound has however been supported by the success of the UK vaccine rollout which has now hit its target of
US Dollar Gains as Global Risk-Aversion Increases
The US Dollar found itself gaining today as global risk-aversion rises as the coronavirus pandemic continues to cause havoc across the globe.
As the US Dollar is a safe-haven currency investors flock to buy it, to cut their losses from the impacts of the pandemic.
The US Dollar was supported by the releases of the IMS Markit PMI, which the Federal Reserve place more importance on, that came in at 58.7
The US Dollar has also been supported today from the release of the US Markit Manufacturing PMI which indicated an improvement in the sector.
Speaking on the data, Chris Williamson, Chief Business Economist at IHS Markit said:
‘US manufacturing started 2021 on an encouragingly strong footing, with production and order books growing at the fastest rates for over six years.’
‘Demand from both domestic and export customers picked up sharply in January, buoyed by several driving forces. Consumer demand has improved while businesses are investing in more equipment and restocking warehouses, preparing for better times ahead as vaccine roll outs allow life to increasingly return to normal over the course of 2021.’
Pound To Be Bolstered On Back Of BoE Optimistic Economic Outlook?
Pound and US Dollar investors will continue to focus on any coronavirus developments in the coming days.
If the UK’s continues to have a successful vaccine rollout and any indication that lockdown measures will be eased at the start of March will prove positive for the Pound.
Investors will wait for the release of Wednesday’s data releases for both the UK and the US. The UK services and US non-manufacturing PMI’s will establish the state of both economies at the start of 2021.
Further ahead, Thursday will see the Bank of England (BoE) hold its February interest rate decision. Though no changes are expected if Governor Andrew Bailey is optimistic about the state of England’s economic recovery moving forward would prove positive for Sterling.