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GBP/USD Exchange Rate Slips as the US Dollar Enjoys New Year Bounce

US Dollar Currency Forecast

GBP/USD Exchange Rate Weakens Amid US Dollar Recovery

The Pound US Dollar (GBP/USD) exchange rate is off to a poor start so far in 2020, as the ‘Greenback’ enjoyed a broad-based recovery.

At the time of writing the GBP/USD exchange rate is trading at around $1.3213, down roughly 0.3% from this morning’s opening levels.

US Dollar (USD) Recovering Following China’s RRR Cut

After closing 2019 on the back foot, the US Dollar (USD) is mounting a recovery in the first day of trade on 2020 as China pumped more money into its economy.

The People’s Bank of China (PBoC) moved to cut its Reserve Requirement Ratio (RRR) by 50 basis points at the start of the year, freeing up around $100bn in liquidity as it hopes to prevent growth slowing further in 2020.

The PBoC said its cut is designed to: ‘Further support the development of the real economy and lower real financing costs.’

Coupled with the announcement that the US and China will sign their phase one trade deal on 15th January, this has helped to inspire some cheer in the US Dollar this morning.

Pound (GBP) Undermined by Gloomy Manufacturing PMI

Meanwhile, the Pound (GBP) is struggling to hold its ground against a resurgent US Dollar (USD) this morning, in the wake of some underwhelming PMI figures.

According to data published by IHS Markit, the UK’s factory index slumped from 48.9 to 47.5 in December, its second worst reading since 2012.

The continued slump in domestic manufacturing will disappoint GBP investors as it fuels concerns that the UK economy will have stagnated or even contracted in the last quarter of 2019.

GBP/USD Exchange Rate Forecast: Weak ISM Manufacturing PMI to Dent the US Dollar?

Looking ahead to the end of the week’s session, the Pound US Dollar (GBP/USD) exchange rate may find some support again with the publication of the ISM manufacturing PMI.

This is expected to show that the US manufacturing sector remained in the doldrums in December, with another slump in factory growth likely to weaken the appeal of the US Dollar.

However, Sterling may still struggle on Friday as the UK releases its latest construction PMI, with economists forecasting the construction sector will have suffered its eighth consecutive month of contraction in December.