GBP/USD Exchange Rate Slumps Despite Poor US Data
The Pound US Dollar (GBP/USD) exchange rate is sliding today despite underwhelming US data amid a souring market mood.
At time of writing the GBP/USD exchange rate is around $1.2766, a 0.40% fall from this morning’s opening levels.
US Dollar (USD) Supported by Safe-Haven Flows
The US Dollar (USD) is holding onto gains today despite downbeat data paring interest rate hike bets from the Federal Reserve. Job openings and manufacturing PMI disappointed to the downside, but a gloomy market mood boosted the safe-haven ‘Greenback’.
The number of job openings in June fell below market expectations and only increased by 9.58m, against predictions of 9.62m. The Bureau of Labor Statistics (BLS) reported in their press release:
‘Over the month, the number of hires and total separations decreased to 5.9 million and 5.6 million, respectively. Within separations, quits (3.8 million) decreased, while layoffs and discharges (1.5 million) changed little.’
Elsewhere, despite an improvement, manufacturing activity in the US remained in contraction territory for the eighth straight month. Timothy R. Fiore, Chair of the Institute for Supply Management, commented on the stuttering factory sector:
‘Regarding the overall economy, this figure indicates an eighth month of contraction after a 30-month period of expansion. The U.S. manufacturing sector shrank again, but the uptick in the PMI indicates a marginally slower rate of contraction. The July composite index reading reflects companies continuing to manage outputs down as order softness continues.’
Pound (GBP) Capped by Lingering Economic Concerns
Meanwhile, the Pound (GBP) lost its momentum despite the policy divergence between the Bank of England (BoE) and other major central banks.
A lack of economic data, and a looming interest rate decision, kept Sterling relatively quiet as investors start moving to the sidelines in anticipation for the latest monetary policy meeting. With inflation cooling faster than expected, it remains far above the target rate of 2%, and still almost double that of other major economies, rate hike bets remain elevated.
However, with concerns over the fragile state of the UK economy, the relentless surge of interest rates could tip the UK into a recession. Lingering growth fears of the UK could be keeping a firm lid on the Pound as the market awaits the pivotal decision from the BoE.
Looking ahead to Thursday, the central bank could opt for either a 25 or 50bps rate hike, and the strength of Sterling could be decided by how hawkish the BoE appears in their forward guidance.