Pound US Dollar (GBP/USD) Exchange Rate Drops as UK PMIs Disappoint
The Pound US Dollar is steadily falling today. An above-forecast drop to UK PMI figures is likely contributing to GBP/USD’s fall today. This comes after the pair fell sharply this morning.
Additionally, a risk-off market mood may also be weighing on the pair as the US Dollar (USD) recovers some of its earlier losses.
At time of writing the GBP/USD exchange rate is at around $1.2507, which is down roughly -0.5% from this morning’s opening figures.
Pound (GBP) Slides as UK Recession Fears Grow
The Pound (GBP) is tumbling against its rivals today after poor UK PMI figures this morning added to fears of a 2022 recession in the UK. The reading of the UK’s services PMI fell to 51.8 versus forecasts of 57 as the country’s cost-of-living crisis squeezes household spending.
Samiel Tombs, chief UK economist at Pantheon Macroeconomics, said:
‘The collapse in the composite PMI in May is the clearest sign yet that demand is faltering in response to the intense squeeze on households’ real disposable incomes.’
Analysts have also highlighted the likelihood that soaring inflation is likely to prompt even worse figures in the coming months.
Concerns that the data could limit further rate hikes from the Bank of England’s (BoE) are also likely weighing on GBP today. Financial markets do still expect the central bank to raise rates to at least 2% by year’s end, however.
US Dollar (USD) Dips despite Risk-Off Mood
The US Dollar (USD) is remaining downbeat against many of its rivals today. The currency is experiencing a renewed sell-off as well as a drop US Treasury bond yields.
A slowdown to US private sector growth may also be pulling USD lower today. The country’s services PMI printed worse than expected as supply chain issues and inflationary pressures harmed business confidence.
The safe-haven ‘Greenback’ may be seeing some of its losses limited by a risk-off trading sentiment, however. Weak forecasts from multiple large US firms have likely led to a retreat in global risk appetite. Social media giant Snap warned that ‘the macroeconomic environment has deteriorated further and faster than anticipated’.
Additionally, expectations of a series of aggressive rate hikes from the Federal Reserve may also be underpinning USD today. Fed Chair Jerome Powell stated last week that the Fed would raise rates as high as needed to tame soaring inflation.