GBP/USD Exchange Rate Edges Higher as UK Economic Outlook Brightens
The Pound US Dollar (GBP/USD) exchange rate edged higher by 0.3% today, with the pairing currently trading around $1.292 following a stronger-than-expected surge in the UK Markit Manufacturing PMI for February, which rose from 50 to 51.9.
Duncan Brock, Group Director at CIPS, was upbeat in his analysis, commenting:
‘As more immediate political instability receded into the background, the combined sectors delivered a healthy return in February with the joint-strongest performance since September 2018. Manufacturing was the sector to experience faster growth as output rose to its highest for almost a year and new orders increased at a pace not seen since March 2019. However, the services sector took a small backward step.’
With the UK economic outlook beginning to look brighter, the GBP/USD exchange rate has benefited.
However, due to lingering doubts over the longevity of the UK’s economic performance in the year ahead – due to rising doubts over a UK-EU trade deal – some investors remain hesitant to trade in Sterling.
USD/GBP Exchange Rate Sinks as Coronavirus Epidemic Threatens Global Economy
The US Dollar (USD) dipped against the Pound (GBP) ahead of today’s release of the flash US Markit Manufacturing PMI, which is expected to remain strong at 51.5.
This will be followed by the US home sales report, with any signs of an uptick in America’s housing sector providing a boost for the ‘Greenback’.
However, the USD/GBP exchange rate has remained subdued to due China’s coronavirus epidemic expected to weigh on markets more broadly, as the world’s second-largest economy is now expected to weaken in the first-quarter and negatively impact the US economy.
After Richard Clarida, the Vice Chairman of the Federal Reserve, insisted that it was unlikely that the central bank would cut its interest rates in the near-term, some USD investors are feeling optimistic about the economy.
Clarida also warned:
‘What are would be looking for is some body of evidence that suggests that we need to make a material reassessment of our outlook, and certainly we have not done that yet. But we are monitoring, because China is a huge part of our economy.’
GBP/USD Outlook: Brexit Developments to Drive Sterling
US Dollar (USD) investors will be awaiting Monday’s release of January’s Chicago Fed National Activity Index, which is expected to fall by -0.92. As a result, we could see the USD/GBP exchange rate fall.
Due to a quiet UK economic calendar next week, the GBP/USD exchange rate is likely to be driven by Brexit developments. Any further signs that the UK could leave the EU without a deal later on this year would prove Pound-negative.