GBP/USD Exchange Rate Falls, UK PMIs Show UK Economic Recovery
The Pound to US Dollar (GBP/USD) exchange rate dipped today, with the pairing down by -0.1% and currently trading around $1.319.
Sterling failed to rise against the US Dollar (USD) today despite a stronger-than-expected UK services PMI for August, which soared from 56.5 to 60.1. However, with signs that Britain’s economy is recovering, some Pound investors have become more optimistic about the services sector.
Tim Moore, the economics director at IHS Markit, commented on the report:
‘August’s data illustrates that the recovery has gained speed across both the manufacturing and service sectors since July. The combined expansion of UK private sector output was the fastest for almost seven years, following sharp improvements in business and consumer spending from the lows seen in April.’
In other UK economic news, today saw the release of the latest UK retail sales figure for July, which beat forecasts and edged higher at 3.6% month-on-month. The year-on-year figure, meanwhile, rose to 1.4%.
Emma-Lou Montgomery, associate director at Fidelity International, was more cautious in her analysis, however:
‘With the UK now in a recession and many households likely to be tightening their belts as a result, spending on non-essential items may take a hit in the coming months, particularly as we approach the end of the furlough scheme in October.’
US Dollar (USD) Edges Higher Despite US Republican-Democrat Loggerheads Over Economic Stimulus
The US Dollar (USD) edged higher today despite the US Republicans and Democrats still at loggerheads over complications regarding economic stimulus. As a result, ‘Greenback’ investors are fast becoming weary over fears for America’s economic performance in the months ahead.
USD has also benefited from weaker-than-expected Eurozone data today. Markets have also begun to flee the US Dollar’s competitor owing to a growing number of Covid-19 cases in France, the Eurozone’s second largest economy.
Consequently, the safe-haven ‘Greenback’ has benefited from growing concerns over Europe’s coronavirus situation.
In US economic news, today will see the release of the flash US PMI composite figure for August. If this edges higher and bolsters hopes of America’s economic recovery, then we could see the ‘Greenback’ suffer as risk-sentiment improves.
GBP/USD Forecast: Could Growing Hopes for the UK Economy Boost Sterling Next Week?
US Dollar (USD) investors will be looking ahead to Monday’s release of the US Chicago Fed National Activity Index for July. Any improvement in the US economy could continue to drag on safe-haven demand for the ‘Greenback’.
Looking ahead to Tuesday, ‘Greenback’ traders will be keeping a close eye on the US consumer confidence gauge and the Richmond Fed Manufacturing Index. Again, any uptick in American economic data could drag down the US Dollar.
Pound (GBP) traders will be awaiting Tuesday’s release of the CBI distributive trade survey for August. If this increases, then we could see hopes grow for Britain’s economic recovery and uplift the GBP/USD exchange rate.
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