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GBP/USD Exchange Rate Climbs after Upside Surprise from Services PMI
Published: 5 Apr at 4 PM Tags: Pound Sterling, Dollar Exchange Rate, Currency Exchange, Forex, UK, Exchange Rates, Economy, Pound Dollar Exchange Rate,
An unexpectedly-strong result from the UK Markit services PMI pushed the Pound Sterling to US Dollar exchange rate up 0.4% on Wednesday.
Pound Strengthens but Concerns Remain Over First Quarter Growth
After the disappointing performances of the UK’s construction and services PMIs earlier in the week, investors had been concerned that the services index would weaken similarly.
However, the services PMI climbed from 53.3 to 55 against predictions of merely edging higher to 53.5.
This had the knock-on effect of pushing the composite index up to 54.9.
Forecasts had been for the composite to hold steady at 53.8, with the weaker manufacturing and construction readings pointing to an unexpected weakening.
The upside surprise helped boost the GBP/USD exchange rate, although economists warned that the overall picture of the economy remained precarious.
‘The survey data indicate that UK business activity growth regained some momentum after having slipped to a five-month low in February, but the upturn fails to change the picture of an economy that slowed in the first quarter,’ said IHS Markit Chief Business Economist Chris Williamson.
He added that; ‘the relative weakness of the PMI survey data compared to that seen at the turn of the year suggests the economy will have grown by 0.4% in the first quarter, markedly lower than the 0.7% expansion seen in the fourth quarter of last year.’
US Dollar Unsettled by Mixed Economic Data Ahead of FOMC Meeting Minutes
The US Dollar weakened on the back of mixed economic data, with the figures giving investors little solid reason to hold the ‘Greenback’ ahead of the latest Federal Open Market Committee (FOMC) meeting minutes.
The day’s data docket had opened promisingly, with the ADP employment change figure rising from a downwardly-revised 245,000 to 263,000 - a slowdown to 185,000 had been expected.
Although there is little proven correlation between the two, investors often take the performance of the ADP figure as an indication for how well, or poorly, the following non-farm payrolls report will fare.
The strong figure therefore suggests that the payrolls will print well, which could help raise the odds of the Federal Reserve opting to hike interest rates again this year.
However, the ISM non-manufacturing composite PMI significantly disappointed expectations, falling from 57.6 to 55.2 instead of just weakening to 57.
GBP/USD Exchange Rate Forecast; Will FOMC Minutes Give Traders Solid Direction?
Investors are waiting for tonight’s release of the Federal Open Market Committee’s (FOMC) latest meeting minutes.
The March meeting saw policymakers hike rates 0.25%, but since then there has been a division apparent amongst the committee; some members think that one hike was enough to get the economy back on track, while others believe the initial target of two additional hikes - if not three - is still called for.
Traders want to know whether the doves or the hawks are in the majority so that they can decide how to position themselves on the US Dollar.
There is nothing on the economic calendar from the UK until Friday now, so GBP is likely to spend tomorrow’s session reacting to the latest USD developments.
At the time of writing the GBP/USD exchange rate was trading around 1.2482, while the USD/GBP exchange rate was trending in the region of 0.8010.
Pound Strengthens but Concerns Remain Over First Quarter Growth
After the disappointing performances of the UK’s construction and services PMIs earlier in the week, investors had been concerned that the services index would weaken similarly.
However, the services PMI climbed from 53.3 to 55 against predictions of merely edging higher to 53.5.
This had the knock-on effect of pushing the composite index up to 54.9.
Forecasts had been for the composite to hold steady at 53.8, with the weaker manufacturing and construction readings pointing to an unexpected weakening.
The upside surprise helped boost the GBP/USD exchange rate, although economists warned that the overall picture of the economy remained precarious.
‘The survey data indicate that UK business activity growth regained some momentum after having slipped to a five-month low in February, but the upturn fails to change the picture of an economy that slowed in the first quarter,’ said IHS Markit Chief Business Economist Chris Williamson.
He added that; ‘the relative weakness of the PMI survey data compared to that seen at the turn of the year suggests the economy will have grown by 0.4% in the first quarter, markedly lower than the 0.7% expansion seen in the fourth quarter of last year.’
US Dollar Unsettled by Mixed Economic Data Ahead of FOMC Meeting Minutes
The US Dollar weakened on the back of mixed economic data, with the figures giving investors little solid reason to hold the ‘Greenback’ ahead of the latest Federal Open Market Committee (FOMC) meeting minutes.
The day’s data docket had opened promisingly, with the ADP employment change figure rising from a downwardly-revised 245,000 to 263,000 - a slowdown to 185,000 had been expected.
Although there is little proven correlation between the two, investors often take the performance of the ADP figure as an indication for how well, or poorly, the following non-farm payrolls report will fare.
The strong figure therefore suggests that the payrolls will print well, which could help raise the odds of the Federal Reserve opting to hike interest rates again this year.
However, the ISM non-manufacturing composite PMI significantly disappointed expectations, falling from 57.6 to 55.2 instead of just weakening to 57.
GBP/USD Exchange Rate Forecast; Will FOMC Minutes Give Traders Solid Direction?
Investors are waiting for tonight’s release of the Federal Open Market Committee’s (FOMC) latest meeting minutes.
The March meeting saw policymakers hike rates 0.25%, but since then there has been a division apparent amongst the committee; some members think that one hike was enough to get the economy back on track, while others believe the initial target of two additional hikes - if not three - is still called for.
Traders want to know whether the doves or the hawks are in the majority so that they can decide how to position themselves on the US Dollar.
There is nothing on the economic calendar from the UK until Friday now, so GBP is likely to spend tomorrow’s session reacting to the latest USD developments.
At the time of writing the GBP/USD exchange rate was trading around 1.2482, while the USD/GBP exchange rate was trending in the region of 0.8010.
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Source: moneytransfer.co.uk