GBP/USD Exchange Rate Climbs amid Strong UK PMIs
The Pound US Dollar (GBP/USD) exchange rate is surging this morning as UK PMIs printed far above forecasts.
At time of writing the GBP/USD exchange rate is around $1.2111, a 0.60% leap from this morning.
Pound (GBP) Buoyed by the Rebounding Service Sector
The Pound is enjoying renewed strength this morning as PMIs for both services and manufacturing surprised to the upside. Registering the highest figure in eight months, and comfortably beating market expectations of 49.2, the service sector rose to 53.3. Manufacturing on the other hand, whilst remaining in contraction territory, also drastically improved to 49.2 from an expected 47.5.
Services entered expansion territory for the first time in six months amid a dramatically improved global economic outlook. Also lending support to the downbeat sector was the reduction in political volatility. However, underlying data still pointed to reduced spending as the cost-of-living crisis weighed heavily.
Further lending some modest support to Sterling is the optimism surrounding the Northern Ireland protocol deal being signed. Foreign Secretary James Cleverly said today that talks are ongoing with the EU, and that Prime Minister Rishi Sunak hopes to strike a deal this week. If the UK can avoid a trade war with the EU, Sterling could be bolstered.
Looking ahead and any further updates with the post-Brexit trade deal could influence the pairing. However, if a deal cannot be struck, pessimism could return, and the Pound could remain under pressure.
US Dollar (USD) Undermined by Uncertain Rate Hike Path
Meanwhile, the US Dollar (USD) is struggling to gather much strength despite an increasingly risk-averse market mood. With investors unsure of the Federal Reserve’s monetary policy going forward, the ‘Greenback’ is somewhat stuttering.
Rising US-Sino tensions continue to weigh on global market sentiment, as US Secretary of State Antony Blinken commented that China could be planning to provide military aid to Russia. In a speech earlier today, Putin vowed to continue the conflict in Ukraine and has accused the West of exacerbating the situation. Putin also commented that Russia had been forced into the conflict.
Further stoking flames of conflict is that Wang Yi, top diplomat to Beijing, is expected to travel to Moscow to meet with Russian President Vladimir Putin. If China does supply lethal aid to Russia, fears of a further escalation of the Ukraine war could sour market mood further.
Looking ahead, the US Dollar could find some much-needed support if PMIs also print to the upside. However, despite an expected improvement, both manufacturing and services are predicted to remain in contraction territory. The ‘Greenback’ could come under increased pressure if PMIs print to forecast.
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