Pound US Dollar (GBP/USD) Exchange Rate Muted as US Manufacturing Employment Disappoints
UPDATE: The Pound Sterling US Dollar (GBP/USD) exchange rate remained muted and the pairing is currently trading at an inter-bank exchange rate of $1.2136.
On Thursday afternoon the US Markit manufacturing PMI plummeted to its lowest level since September 2009.
July’s PMI posted at 50.4 in July, down slightly from June’s 50.6 thanks to muted client demand.
The ‘Greenback’ was left under pressure as data also revealed that employment dipped for the first time since June 2013.
Commenting on this afternoon’s data, Chief Business Economist, Chris Williamson noted:
‘US manufacturing has entered into its sharpest downturn since 2009, suggesting the goods-producing sector is on course to act as a significant drag on the economy in the third quarter. The deterioration in the survey’s output index is indicative of manufacturing production declining at an annualised rate in excess of 3%.
‘Employment is now also falling for only the second time in almost ten years as factories pull back on hiring amid the growing uncertainty.’
Added to this, further data showed the number of Americans filing for unemployment increased.
Construction spending also slumped, falling to its lowest level in one-and-a-half years which dampened US Dollar sentiment.
Pound US Dollar (GBP/USD) Exchange Rate Touches 31-Month Lows
UPDATE: The Pound Sterling US Dollar (GBP/USD) exchange rate decreased and the pairing is currently trading at an inter-bank exchange rate of $1.2103.
On Thursday, Bank of England (BoE) policymakers voted unanimously to leave interest rates unchanged at 0.75%.
The bank warned against a no-deal Brexit as this could leave Sterling at record lows against other currencies.
The pairing hovered around 31-month lows, even falling below $1.21 earlier during today’s session.
The BoE downgraded its forecasts for 2019 and 2020, now predicting growth of 1.3% assuming the UK avoids a disorderly Brexit.
This is down from May’s forecasts of 1.5% growth in 2019 and 1.6% in 2020.
Pound US Dollar (GBP/USD) Exchange Rate Falls as Powell Rules Out Lengthy Fed Easing
The Pound Sterling US Dollar (GBP/USD) exchange rate slipped and the pairing is currently trading at an inter-bank exchange rate of $1.2119.
On Wednesday evening, the US Federal Reserve cut interest rates for the first time in a decade.
However, Fed Chair Jerome Powell said the move to cut rates by 25 basis points may not be enough.
In a news conference after, Powell stated:
‘Let me be clear – it’s not the beginning of a long series of rate cuts.’
However, he also added ‘I didn’t say it’s just one rate cut.’
The ‘Greenback’ made gains as a lengthy Fed easing was ruled out by Powell, however traders still expect another rate cut in 2019.
Commenting on this, Chief Currency Strategist at Mizuho Securities, Masafumi Yamamoto said:
‘The comments by Powell were not particularly dovish, so this is confirmation that this is a small insurance cut.
‘This outcome limits the Dollar’s downside from here. Rate cuts will be on the small side, but this still strengthens the case for a prolonged US economic expansion, which is positive for the Dollar long term.’
Sterling (GBP) Slides as UK Manufacturing ‘Suffocating’
On Thursday morning, data revealed that the UK Markit manufacturing PMI was left stuck at a six-and-a-half year low.
July’s PMI was left at 48 as new orders, manufacturing output and employment all slumped once again.
Added to this, Sterling was left under pressure as manufacturing production fell by the greatest extent in seven years.
The survey found that due to ongoing uncertainties and slower global growth, order production and intakes slumped.
Companies said that clients were routing supply chains away from the UK in preparation for Brexit.
Commenting on this, Director at IHS Markit, Rob Dobson said:
‘July saw the UK manufacturing sector suffocating under the choke-hold of slower global economic growth, political uncertainty and the unwinding of earlier Brexit stockpiling activity. Production volumes fell at the fastest pace in seven years as clients delayed, cancelled or re-routed orders away from the UK, leading to a further decline in new work intakes from both domestic and overseas markets.’
Pound US Dollar Outlook: Will GBP Slump Following a Dovish BoE?
Looking ahead to this afternoon, the Pound (GBP) could slide against the US Dollar (USD) ahead of the Bank of England’s (BoE) interest rate decision.
While the bank is expected to leave rates unchanged, Sterling sentiment will slide if the BoE hints at a possible near-term rate cut.
Meanwhile, the Dollar could rise against the Pound following the release of the US ISM manufacturing PMI.
If July’s PMI rises higher than expected, the Pound US Dollar (GBP/USD) exchange rate could slide.