Pound US Dollar (GBP/USD) Exchange Rate Rises despite UK Construction Declining for First Time in 11 Months
This morning, the Pound US Dollar exchange rate fluctuated following the release of the UK Construction PMI.
The pairing is currently trading up around 0.3% at an inter-bank rate of $1.3235.
The UK Markit construction PMI showed that in February construction activity declined for the first time in 11 months, with the figure slipping to 49.5 in February, down from the previous 50.6 following a sharp deterioration in supplier performance.
Growth in residential work was recorded for the thirteenth month running, however this growth was only modest and could do little to offset declines for commercial and civil engineering activity.
Commenting on the data release, Group Director at the Chartered Institute of Procurement and Supply, Duncan Brock, said:
‘The recent fears over the Brexit-related impacts on the sector were realized this month, as barring the weather-related blip in March last year, construction put in its worst performance since September 2017, with the PMI contracting to just below the no-change mark.
‘The domino effect of stockpiling by other sectors such as manufacturing impacted on supplier performance, as builders competed for dwindling supplies of raw materials, while transportation availability also became a problem, leading to supply chain bottlenecks. This meant that purchasers were subjected to the second-longest delivery times since March 2015, affecting work already in-hand.’
GBP/USD Rises on Reports of Potential US-China Summit
Reports that the US and China could reach an agreement at a summit around 27 March saw investors pull out of the safe-haven US Dollar.
The Wall Street Journal reported that all or most of the tariffs on Beijing are likely to be lifted, and a summit between the US President Donald Trump and Chinese Premier Xi Jinping could happen later this month.
While it has been reported that there has not yet been a date set for the summit, Beijing has reserved a 10-day window for a possible summit.
On Saturday, President Trump said that he has requested for all agricultural tariffs to be lifted.
The President took to Twitter, stating:
‘I have asked China to immediately remove all Tariffs on our agricultural products (including beef, pork, etc.) based on the fact that we are moving along nicely with Trade discussions and I did not increase their second tranche of Tariffs to 25% on March 1. This is very important for our great farmers – and me!’
Pound US Dollar Outlook: Will the GBP/USD Exchange Rate Slide on US Manufacturing?
Looking ahead to tomorrow, the Pound (GBP) is likely to receive an upswing of support following the release of the like-for-like retail sales.
If February’s sales figures increase as they did in January it could see Sterling rise against the US Dollar (USD).
The UK Markit Services PMI is also due for release tomorrow, which may see the GBP/USD exchange rate rise.
If growth in the service sector increases, it could see Sterling buoyed.
Meanwhile, the afternoon could see the US Dollar claw back some of its losses following the release of February’s ISM Non-Manufacturing PMI.
If the PMI increases from 56.7 to 57.3 as forecast, it could see the Pound US Dollar (GBP/USD) exchange rate slide.