GBP/USD Exchange Rates : Pound Dollar Rate Drops as PMI Figure Causes Selling Pressure on Pound Sterling

3 Mar 2011 at 10 AM - Written by John Cameron

STORY LINK GBP/USD Exchange Rates : Pound Dollar Rate Drops as PMI Figure Causes Selling Pressure on Pound Sterling

Global equities markets had a mixed day yesterday, but the leading sentiment indicator, the S&P 500, closed down by over a percentage point at 1308, almost 3% lower than it was as recently as 21st February. This confirms a dip in global appetite for risk which would normally see the dollar benefit as the world’s reserve currency of choice.

The fact that the Dollar has suffered broad weakness since 21st February, whilst the Yen and Swiss Franc have appreciated, will provide concern for investors holding Dollars.
The price of a barrel of Brent Crude Oil rose during yesterday’s session to close at above $116. Top of the range oil prices are likely to negatively impact on the Dollar in light of Federal Reserve chairman Ben Bernanke’s comments earlier in the week which suggested that the real economy in the States would suffer if they remained at or near current levels for a prolonged period.

Meanwhile, in the UK, this morning’s PMI Services Sector figure came out at 52.6 against expectations of 53.7. The UK economy has relied heavily on its services sector in recent times following the scaling back of its industrial base since 1979, so the fact that confidence remains brittle in this key sector will cause selling pressure on the Pound.

Initial jobless claims figures released in the States this afternoon will give an indication of what to expect from tomorrow’s key Non-Farm Payroll number for February. Any hint of further structural weakness in the US real economy may result in Dollar weakness, causing the GBP/USD rate to test the 13 month high of 1.6344 which it reached yesterday.

TAGS: American Dollar Forecasts Daily Currency Updates Pound Dollar Forecasts Pound Sterling Forecasts