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Pound Sterling US Dollar (GBP/USD) Exchange Rate Falls Following Slowest Rise in UK Construction Activity in 10 months

GBP/USD Exchange Rate Weighed Down by Worse-than-Expected UK Construction PMI

The Pound US Dollar (GBP/USD) exchange rate slid over the course of the morning, and is currently trading at an inter-bank rate of $1.3067.

Likely weighing down the Pound is the UK Markit construction PMI data, which fell to a lower-than-expected 50.6, the slowest rise in construction business activity for 10 months.

Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply stated:

‘The biggest shock came in the form of job creation which has managed to suffer the slings and arrows of Brexit highs and lows with solid hiring since the referendum result. Employment rose at the slowest rate since July 2016 and with optimism also in short supply, the sector only needs a small nudge to tip it closer to recession.’

Last Week: Pound (GBP) Slides as Analyst Claims Manufacturing could ‘Fall into a Recession’

Following the release of the UK’s Markit manufacturing PMI, the GBP/USD exchange rate fell and remained weighed down throughout the morning into the early afternoon, likely due to the results sitting at a three-month low.

Rob Dobson, Director at IHS Markit stated:

‘The start of 2019 saw UK manufacturers continue their preparations for Brexit. Stocks of inputs increased at the sharpest pace in the 27-year history, as buying activity was stepped up to mitigate against potential supply-chain disruptions in coming months. There were also signs that inventories of finished goods were being bolstered to ensure warehouses are well stocked to meet ongoing contractual obligations.

[…]January also saw manufacturing jobs being cut for only the second time since mid-2016 as confidence about the outlook slipped to a 30-month low, often reflecting ongoing concerns about Brexit and signs of a European economic slowdown. With neither of these headwinds likely to abate in the near-term, there is a clear risk of manufacturing sliding into recession.’

Last Week: US Dollar (USD) Could not stop Sterling (GBP) Despite Surge in US Job growth

Friday saw better-than-expected nonfarm payrolls data for the US, as job growth surged by 304,000 – the highest figure in 11 months – despite the partial government shutdown.

January’s data marked 100 straight months of job gains in the US, which likely further boosted the ‘Greenback’.

Meanwhile, average hourly wages also saw annual growth slip to 3.2% from the previous adjusted figure of 3.3%.

However, US unemployment crept higher to 4% in January, despite forecasts suggesting this figure would remain steady at 3.9%.

This weekend US President Donald Trump gave an interview on ‘Face the Nation’, in which he remained positive about the US-China trade talks, stating:

‘We are making a deal. It looks like we’re doing very well with making a deal with China. I can tell you this, no two leaders of this country and China have ever been closer than I am with President Xi. We have a good chance to make a deal.’

His positive sentiment may have lessened demand for the safe-haven USD.

GBP/USD Outlook: Will Sterling be Weakened by a Poor Services PMI?

Today sees the start of three days of talks between Brexit Secretary Stephen Barclay, MPs and government officials, as they discuss alternative arrangements to the Irish backstop.

This could cause movement in the Pound US Dollar (GBP/USD) pairing, as it has been pointed out by the Irish Prime Minister that the UK was reviewing ideas that had ‘already been rejected.’

Tomorrow will see the release of the UK like-for-like retail sales for January, which are predicted to contract further, potentially weakening GBP/USD.

The UK Markit Services PMI is also due for release on Tuesday, with the forecast showing a drop from 51.2 to 51.0, although any further-than-expected fall could see sentiment in Sterling slide.

January’s US Markit services and composite PMIs are both set to be released on Tuesday, with the forecast suggesting that there will be steady growth, with both figures remaining the same as they were in December.