US Dollar (USD) Denied Rally as Manufacturing PMI Shows Slowing Growth, GBP/USD Exchange Rate Sees Minimal Gains
Yesterday’s US Personal Consumption Expenditure Index met forecasts as it rose slightly to 1.3%, however this was soon outweighed in the minds of traders as the country’s Manufacturing PMI was reported to be significantly worse than anticipated. Rather than remaining static at 53.5 the index slid to 52.7, indicating a decrease in growth for the sector and increasing speculation that the Federal Open Market Committee (FOMC) will ultimately opt to leave interest rates on hold in the coming months.
After a fairly turbulent opening to the week, the GBP/USD pairing has settled a little today to trend narrowly in the region of 1.5604.
Sentiment cools on the ‘Buck’ after underperformance on the US Employment Cost Index with the Pound (GBP) enjoying resurgence today with an above-expected Manufacturing PMI.
US Dollar (USD) Value Stalled on Low Wage Increase while Drop in Consumer Confidence Hurt Pound (GBP)
GDP figures coming in slightly below-forecast on Thursday marked the beginning of a snag in the steadily increasing value of the ‘Greenback’ (USD). Friday’s Employment Cost Index further compounded the loss as it fell short of the previous quarter’s data and the anticipated figure of 0.6% to give a disappointing result of 0.2%. The lowest increase in wages since the Index was first implemented in 1982, this could potentially point to an oncoming downturn in the previously robust US economy. With the rest of the world having suffered serious contractions in the previous month it seems only natural that it should ultimately come to affect them too.
In spite of floundering somewhat on a less than impressive result with the UK’s Consumer Confidence Survey, Sterling (GBP) was able to capitalise on the weakness of the ‘Buck’ to push the GBP/USD exchange rate back up to 1.5657. Although this initial gain was gradually eroded it still remained trending at a relative high for the duration of the weekend.
Manufacturing PMI Report Improves Outlook for Sterling (GBP) Today, GBP/USD Exchange Rate Subject to Anticipation of US Data
The Pound continued to make gains against the softened ‘Buck’ this morning as the country’s Manufacturing PMI result revealed a greater gain than anticipated. Rising to 51.9, 0.3 above the forecast figure, this demonstrated a return to growth for the manufacturing sector after the previous month’s contraction. While the UK economy does primarily rely on services, this improvement nevertheless seems to indicate that conditions are generally improving within the nation.
However, a raft of new data to come from the other side of the Atlantic this afternoon could reverse the present trend and see the US Dollar return to its distinct strength of the previous weeks. The Personal Consumption Expenditure year-on-year index for June is likely to be the prime cause of movement, although the Manufacturing PMI for the US will also probably prompt shifts in the exchange rate. Either of these hitting, or perhaps even exceeding, target will surely eliminate some of investor’s concerns regarding the currency this week, suggesting that the nation’s economic health is in fact not in decline and that a rate rise from the Federal Open Market Committee (FOMC) may well be inbound in the coming months.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast: Pound Awaits Potential Rally on Upcoming Bank of England Reports
Later in the week, employment figures, the Balance of Trade and Non-Manufacturing PMI for the US also stand to be prime movers for the pairing. Should these further confirm an overall improvement in the domestic economy the US Dollar will surely begin another bullish round of trading.
For the Pound things will be relatively quiet on the domestic front until Thursday, when the Bank of England (BoE) Inflation Report and Interest Rate Decision will be emerging to influence the market. While a rise in interest rates is all but ruled out at this point, any indications that members of the Monetary Policy Committee (MPC) have begun to vote for a hike are likely to offer encouragement to hawkish traders and bolster Sterling to potentially push the GBP/USD pairing towards a new monthly high.
Current GBP, USD Exchange Rates
Presently the GBP/USD pairing is in the region of 1.5591, with USD/GBP trending narrowly around 0.6413.