GBP/USD Exchange Rate Jumps as US Data Disappoints
The Pound US Dollar (GBP/USD) exchange rate rose through today’s session as America’s ISM manufacturing PMI revealed a slowdown in activity in July. Looking ahead, tomorrow’s JOLTs data could subdue the US Dollar (USD) further if it reveals a contraction in vacancies.
At the time of writing, GBP/USD is trading at $1.2272, up 0.8% from today’s opening levels.
US Dollar (USD) to Tumble on Job Opening Figures?
The US Dollar may continue to face headwinds tomorrow if June’s JOLTs release reveals a decreasing number of vacancies. The ‘Greenback’ is already on the back foot following today’s ISM manufacturing data, which printed at 52.8 from 53 the month previous.
The number of job vacancies in the US is expected to drop to a 7-month low, reflecting a waning demand for workers amid a weakening economy.
America’s Q2 GDP release printed at -0.9% following a 1.6% contraction in Q1 in the first back-to-back decline since 2020 during the onset of the Covid-19 pandemic. This meets the criteria of a technical recession, denting USD morale somewhat.
However, analysts at UOB Group say this ‘remains far from the consideration of a full recession as there are parts of the economy still expanding.’
On the other hand, the banking group now expects full year GDP growth to be lower than initially forecast, at 1.8% in 2022. This reflects a worsening assessment of the impact of inflation upon growth.
Later in the week, non-farm payrolls could corroborate weak JOLTs data, if the US economy added a smaller number of jobs in July than in June. Consensus estimates predict the reading will print at 250,000 from 372,000 the month previous.
Pound (GBP) to Weaken on Lack of Data?
The Pound (GBP) will trade amid quiet conditions tomorrow, as a lack of UK data exposes the currency to losses. Sterling may trade on external factors such as the political leadership contest, as tensions mount between candidates.
Liz Truss claimed today that her opponent Rishi Sunak’s plan to increase corporation tax would stifle growth and cause a recession, exacerbating existing fears as GDP growth is set to slow sharply in the coming months.
Further news of industrial action may also cap gains for the Pound, as more and more firms plan to strike over wages and working conditions. Thousands of BT and Openreach workers striked today, mounting picket lines outside company offices to protest what is considered an inadequate pay increase.
Such action causes disruption in the affected industry – although a BT Group spokesperson stated that ‘[the company] will work to minimise any disruption and keep our customers and the country connected.’
Elsewhere, optimistic rate hike bets may support Sterling and cap losses for the currency, as the Bank of England (BoE) confirms that a 0.25% raise is the most likely course of action for Thursday, but it will be ‘a close call’ between that and a 50bps hike.