Brief GBP/USD Rally Ends Despite Positive UK Services PMI
Fresh UK services PMI results for March released this morning scored at 53.7, comfortably higher than the forecast 53.5 and a whole point up from February’s 52.7.
Unfortunately, UK data has seemingly failed to impress investors who remain almost apathetic to the volatile Pound. The services industry is Britain’s largest sector, accounting for a considerable portion of its GDP.
Under normal circumstances, a good services score would be enough to begin a Sterling rally. Unfortunately amid Britain’s ongoing stresses, GBP/USD has slumped back to near the weekend’s 1.4229.
The Pound Sterling to US Dollar (GBP/USD) exchange rate had begun to rally last week thanks to a dovish Federal Reserve, but with the week ending in more optimistic US data and increased concerns relating to Britain’s ecopolitical situation the pair is falling once again.
UK Data Fails to Impress, UK Steel Situation Still not Resolved
The GBP/USD pair seems sluggish as markets open this week, with investors perhaps rethinking the Sterling recovery that took place early last week.
Investors had invested in the Pound en masse after Federal Reserve disappointments, but this situation began to reverse itself when the relative strengths of the UK and US economies made themselves known.
After dropping around almost -150 pips during Friday’s session, the GBP/USD pairing rested on 1.4229 for the weekend. As markets reopened this morning, movement seems slight and uninspired, with ‘Cable’ trending in the region of 1.4227.
Markets may be waiting to be stimulated by new data or progress in Britain’s ongoing crises before making more decisive movement.
As well as facing continued economic uncertainty from the possibility of a ‘Brexit’, the Pound has been weighed down by a lack of urgency and action on a situation that could result in the loss of over 10,000 jobs.
Indian steel manufacturing company Tata Steel has decided to withdraw operations from Britain after revealing that they lose -£1m per day on poor trade. Steel plants will be closed altogether, affecting thousands of jobs, if a solution is not found soon.
Positive Construction PMI released for Britain this morning was unable to ignite GBP confidence. The monthly print came in at 54.2, matching February’s figure despite forecasts of 54.1.
Investors Begin to Readjust on US Dollar Following Strong Data
As previously mentioned, the US Dollar weakened against the Pound last week as Federal Reserve Chairwoman Janet Yellen indicated that the Fed would maintain a cautious attitude on US interest rates.
The hugely unpopular statement saw a kneejerk movement as investors flocked away from the ‘Greenback’. However, a slew of positive data on Friday may have reminded investors of the USD’s reliability.
Friday’s prints included the key unemployment rate, non-farm payroll data and ISM Manufacturing scores. Unfortunately unemployment was revealed to have unexpectedly risen slightly, from 4.9% to 5%, but this slight increase was largely due to an increase in the participation rate and so wasn’t negatively received.
The change in non-farm payroll data revealed that an additional 215k jobs were created in March, 10k higher than the forecast 205k. Hourly earnings were also up 0.1% from expected levels, with the year-on-year figure printing at 2.3%.
March’s latest ISM Manufacturing report was unexpectedly bullish, scoring 51.8 from 49.5 and beating forecasts of 50.7. Prices Paid ISM leapt considerably from a 38.5 contraction to 51.5, beating out predictions of 44.0.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast: Can Data Return Confidence to the ‘Greenback’?
GBP/USD movement slowed as last week drew to an end and the pairing continues to move slowly thus far during the new week’s session. Investors may be waiting on some kind of progress or news on the UK or US ecopolitical situations before a decisive trend in either direction begins.
The UK’s political cogs may soon begin to stir as citizens and investors wait for developments on the Tata Steel UK crisis.
With thousands of jobs on the line and calls all over the country to save Britain’s steel industry from vanishing, unions have announced that meetings will be held and have urged Prime Minister David Cameron to take charge of talks that could offer potential solutions.
UK data, on the other hand, takes a slight backseat for the time being until Services PMI data is released tomorrow morning.
As for the ‘Buck’, a collection of US data due for release this afternoon could help persuade investors back towards USD if data positivity continues. Included in the session are changes in labour market conditions as well as orders on factory products and durable goods.
While most imminent US data is forecast to print negatively, scoring higher-than-expected is likely to restore some hurt faith in the US economy and inspire the US Dollar to climb against the weakened Pound.
The Pound Sterling to US Dollar (GBP/USD) exchange rate currently trends around 1.4427 while the US Dollar to Pound Sterling (USD/GBP) exchange rate trends in the region of 0.7028.