GBP/USD Exchange Rate Edges Higher as UK New Car Sales Rise for the First Time in 2020
The Pound to US Dollar (GBP/USD) exchange rate edged higher this morning, with the pairing currently trading around $1.31.
Sterling rose against ‘Greenback’ following today’s release of the UK services PMI for July, which undershot forecasts from 56.6 to 56.5. However, with Britain’s largest sector performing relatively well GBP investors are becoming more optimistic about the nation’s economic recovery.
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, was more cautious in his analysis, saying:
‘This undoubtedly good news is masking some underlying problems that will still need addressing. Employment fell even more quickly in July as some firms made redundancies in response to worries about the length of the recovery. Although in a small minority, other service providers found new opportunities to hire talent and had the pick of the bunch to fill vacancies from growing numbers of applications.’
In other UK economic news, today saw UK new car sales improve by 11% in July. With new car sales rising for the first time this year, Pound (GBP) investors have become more positive about the economy.
US Dollar (USD) Falls as Concerns Grow Over Covid-19’s Impact on US Economy
The US Dollar (USD) fell against the Pound (GBP) after the currency’s biggest competitor – the Euro (EUR) – edged higher after Eurozone companies posted the fastest growth in two years. Consequently, investors have flocked the US Dollar for the Euro’s safe-haven instead.
Piotr Matys, senior emerging markets currency Strategist at Rabobank, was downbeat about the US Dollar, saying:
‘While a consolidation or a modest corrective rebound was inevitable after the sharp fall last month, market sentiment towards the dollar remains negative due to dominating concerns about the scale of the coronavirus pandemic in the U.S. and its devastating impact on the economy.’
Meanwhile, the US Dollar (USD) has benefited from growing uncertainty over the US fiscal stimulus package and worries over rising coronavirus infections both domestically throughout the world. As a result, the ‘Greenback’ has continued to benefit from its safe-haven status.
In US economic news today, the US ISM non-manufacturing PMI for July is expected to dip from 57.1 to 55. However, with the American economy performing relatively well despite the coronavirus pandemic, this is unlikely to drag down the ‘Greenback’ significantly.
GBP/USD Forecast: Could a Dovish Bank of England Drag Down the Pound Tomorrow?
Pound (GBP) investors will be looking ahead to tomorrow’s interest rate decision from the Bank of England (BoE). Although the Bank if forecast to hold its interest rates at 0.1%, a dovish monetary policy statement could drag down Sterling.
Meanwhile, US Dollar (USD) investors will be awaiting tomorrow’s release of the US jobs data for July. Any indication that the American economy is struggling would prove USD-negative.
The GBP/USD exchange rate could shed some of its gains this week if the UK’s domestic Covid-19 crisis shows any signs of a turn for the worst.