Pound Sterling US Dollar (GBP/USD) Exchange Rate Boosted by UK Construction Growth
The Pound Sterling to US Dollar (GBP/USD) exchange rate recovered some ground on the back of a stronger-than-expected UK construction PMI.
As the headline PMI unexpectedly jumped from 52.5 to 53.1 in June this encouraged greater confidence in the underlying health of the UK economy.
With construction activity finally picking back up in the wake of the first quarter’s disruptive weather this raised hopes that the earlier slowdown was not a structural issue.
Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply, commented:
‘With the fastest rise in new orders since May 2017, it appears the brakes are off for the construction sector. Despite being hampered by economic uncertainty, firms reported an improved pipeline of work as clients committed to projects and hesitancy was swept away.’
Even though a significant degree of Brexit-based uncertainty remains this was enough to boost Pound Sterling (GBP).
GBP/USD Exchange Rate Trends Higher Despite Improved US Data
While US factory orders showed a solid rebound on the month in May this failed to particularly weigh on the Pound Sterling to US Dollar (GBP/USD) exchange rate.
Even though the latest US data added to the more positive picture of the domestic economy the mood towards the US Dollar (USD) still soured on Tuesday.
Comments from policymakers at the People’s Bank of China (PBOC) which ruled out the possibility of a currency war prompted a general resurgence in market risk appetite.
This left USD exchange rates on a weaker footing, reversing some of the previous day’s gains as investor jitters eased.
Although a significant degree of uncertainty continues to hang over the global trade outlook the US Dollar may struggle to capitalise further on this in the near term.
Strong UK Services PMI Forecast to Boost Pound Sterling US Dollar (GBP/USD) Exchange Rate
If the UK services PMI also prints positively the Pound Sterling to US Dollar (GBP/USD) exchange rate looks set to find further gains.
With the service sector accounting for more than three quarters of the UK gross domestic product a healthier reading would give investors significant cheer.
However, any underlying signs of weakness within the report could leave Pound Sterling open to a fresh slump.
Market focus is also set to turn towards politics in the days ahead, with Theresa May’s cabinet still yet to agree a unified position on key Brexit issues.
As the EU has already rejected the latest UK proposals as unrealistic there are fears that the two sides will remain at odds for some time to come.
A continued lack of progress is likely to limit the scope for further Pound Sterling to US Dollar (GBP/USD) exchange rates.