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Rebound in UK Services Buoys the Pound US Dollar (GBP/USD) Exchange Rate

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Pound Sterling US Dollar (GBP/USD) Exchange Rate Rises as UK Services PMI Rebounds

The Pound Sterling US Dollar (GBP/USD) exchange rate edged up 0.3% , leaving the pairing trading at around $1.3059.

The Pound received a boost after UK services data showed the sector rebounded in January.

January’s PMI jumped to 53.9, the highest level since September 2018. Added to this, business activity rose for the first time in five months.

Thanks to the UK general election, previous headwinds from delayed decision making eased, buoying the sector.

Commenting on this, Tim Moore, Economics Associate Director at IHS Markit noted:

‘January’s PMI surveys give a clear signal that the UK economy has picked up since the general election, as a diminishing headwind from political uncertainty translated into rising business and consumer spending. We maintain our nowcast of UK GDP rising by approximately 0.2% in the first quarter of 2020, which represents an improvement on the sluggish conditions seen at the end of last year.

‘With the vast majority of PMI survey data collected prior to 23rd January, we’ve yet to see any overall impact on business conditions from the Wuhan coronavirus outbreak, but disruptions to global supply chains and international travel could present risks to the UK economy and key trading partners in the coming months.’

US Factory Orders Jump to 17 Month High

On Tuesday, data revealed that US new orders jumped by the most in close to a year and a half.

Thanks to a robust demand for defense aircraft, orders increased by 1.8% in December.

However, the data also revealed that continued weak business spending on equipment means it seems unlikely there will be a sharp rebound in US manufacturing.

Commenting on this, senior economist at Moody’s Analytics, Ryan Sweet noted:

‘The strength in [factory orders] is a little misleading. Fundamentals haven’t improved significantly for either manufacturing or real business equipment spending.’

Meanwhile, on Tuesday US President Donald Trump gave his State of the Union speech, highlighting the US was in its 11th year of a record economic expansion.

In his speech, the President stated:

‘I am thrilled to report to you tonight that our economy is the best it has ever been.’

However, this could do little to boost the Dollar against the Pound on Wednesday.

Pound Dollar Outlook: US PMIs in Focus

Looking ahead to this afternoon, the US Dollar (USD) could rebound against the Pound (GBP) following the release of the US services PMI.

If Markit show the US service sector expanded at a faster rate than forecast, the Dollar will receive a boost.

The ‘Greenback’ could receive further support as ISM is also due to release its own measure of non-manufacturing PMI data.

If the Federal Reserve’s preferred measure of non-manufacturing PMI rises higher than expected, the Pound US Dollar (GBP/USD) exchange rate will retreat.

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