GBP/USD Exchange Rate Falls as ‘Greenback’ Benefits from Recovering US Economy
The Pound to US Dollar (GBP/USD) exchange rate fell by -0.2% today, with the pairing currently trading around $1.331.
The US Dollar (USD) clawed back its safe-haven status following the largest expansion in US manufacturing activity in 2-years. The US ISM Manufacturing PMI for August surged to 56, flying past forecasts of 54.5.
Analysts at Reuters commented:
‘A reading above 50 indicates expansion in manufacturing, which accounts for 11% of the U.S. economy.
‘But the continued improvement in manufacturing is uneven, as the Covid-19 pandemic shifts spending away from equipment used in the services industries such as restaurants and bars to purchases of goods like home electronics.’
Meanwhile, US Dollar (USD) investors appeared to look past the weak US ADP employment report as investors focus on more influential data like the non-farm payroll figures due out Friday.
In US economic news, today will see the release of the ISM Services PMI for August. Any signs of a recovery for America’s economy could further buoy the ‘Greenback’.
Pound (GBP) Falls as EU Expresses ‘Disappointment’ in Lack of Brexit Progress
The Pound (GBP) struggled to gain against the US Dollar (USD) after Michel Barnier – the EU’s Chief Negotiator – expressed disappointment in the lack of progress on Brexit.
Mr Barnier told the Institute of International and European Affairs in Dublin:
‘We didn’t see any change in the position of the UK, which is why I expressed publicly what I say, that I am worried and I am disappointed because, frankly speaking, we have moved, [and] shown in many issues real openness in the past months.’
In UK economic news, today saw the release of the UK Services PMI for August, which undershot forecasts but remained strong at 58.8.
Chris Williamson, Chief Business Economist at IHS Markit, commented:
‘A further surge in service sector business activity in August adds to signs that the economy is enjoying a mini boom as business re-opens after the lockdowns, but the concern is that the rebound will fade as quickly as it appeared.’
Today will also see the Bank of England’s Governor, Andrew Bailey, deliver a speech. Any dovish about the British economy could drag down the GBP/USD exchange rate.
GBP/USD Outlook: Could Positive UK Construction Data Buoy Sterling?
US Dollar (USD) investors will be keeping a close eye on tomorrow’s US non-farm payrolls figure for August. Any marked improvement in the gauge could further bolster the ‘Greenback’.
Tomorrow will also see the release of the US unemployment rate report for August. If unemployment drops, then we could see the USD/GBP exchange rate head higher.
The GBP/USD exchange rate could, however, claw back some of its losses if tomorrow’s UK Markit Construction PMI for August beats forecasts. As a result, Sterling would benefit from signs of recovery in the British construction sector.