GBP/USD Stabilises Following Impressive Rise in US Service Activity
The Pound US Dollar (GBP/USD) exchange rate is holding steady this morning after suffering heavy losses following the release of the latest US Services PMI on Monday.
At the time of writing the GBP/USD exchange rate trading close to the morning’s opening levels, with the Pound having retreated again following its early advance.
US Dollar (USD) Bolstered by Impressive Services PMI
While having ceded some ground this morning the US Dollar remains close to a two-week high this morning, following some impressive growth in the US service sector last month.
ISM’s Non-Manufacturing PMI saw a dramatic surge in January as it rocketed up from 56.0 to 59.9, easily beating expectations of a modest rise to 56.5 and striking its highest levels since 2005.
The surge in the index was largely driven by the highest employment reading on record, which in turn was bolstered by strong global demand amidst a weakened US Dollar.
The uptick also lead to speculation that the Federal Reserve may deliver its next rate hike as early as March.
James Knightley, economists at ING Bank said;
‘There is going to be growing pressure for the Fed to raise its economic forecasts and signal the potential for four rate hikes when they update their numbers at the March FOMC meeting.’
‘It will take something really big to prevent a March rate hike.’
Meanwhile the Pound’s attempts to recoup its losses this morning are having limited success, with Sterling sentiment remaining weighed down by Brexit uncertainty and concerns over the unity of the UK government.
GBP/USD Forecast: BoE to Hint at Possible Rate Hike?
Looking ahead movement the GBP/USD exchange rate this week is likely to driven by the Bank of England’s (BoE) latest rate decision on Thursday.
Economists do not expected the bank to make any alterations to its monetary policy at this point but are hoping that the BoE may outline some of its plans for the coming months.
Markets will be mainly watching to see whether the BoE echoes other central bank’s this year in striking a more hawkish tone towards the possibility of further monetary tightening in 2018.
Meanwhile the US Dollar may tumble later this afternoon as the US publishes its latest trade figures, with analysts forecasting that the US trade deficit will have widened again in December.