GBP USD Exchange Rate Spirals And GBP NZD, GBP AUD Fall Away

Published: Tuesday, 4 June 2013 09:00 BST - Written by John Cameron

STORY LINK GBP USD Exchange Rate Spirals And GBP NZD, GBP AUD Fall Away

Weak leading indicators from the world’s two premier economies have altered the landscape of the global currency markets during the past 48hrs. Monday’s Asian session brought the release of another disappointing report from China, this time in the form of May’s HSBC Manufacturing sector PMI survey. The gauge of activity levels in the workshop of the world showed an unexpectedly large drop-off from April’s counterpart figure, showing at 49.2 versus the previous month’s print of 50.4. The reading of below 50 shows that the key sector of the world’s second largest economy is now in contraction.

The negative sentiment increased as yesterday’s session progressed and the alarm bells were ringing out loudly when the ISM Manufacturing survey for May was published in the States. Analysts had been anticipating that the closely-watched audit of the health of America’s real economy would show at the same level as last month’s version. When the headline figure was published, it showed that activity in the US manufacturing sector had dropped down below the 50 level for the first time in some six months. The showing of 49.0 versus an anticipated 50.7 came as a blow to investors who have been eagerly buying up US Dollar denominated assets over the past few months in hope of a near-term scaling back of the US Quantitative Easing programme by the Federal Reserve. The development would now appear to make a reduction in the $85bn per calendar month which the Fed is pumping into the US economy a lot less likely in the short term. The Greenback benefitted as a result, sending the Pound to US Dollar exchange rate (currency : GBP USD) back up above the 1.5300 level during the latter part of yesterday’s European equities session.

The Buck was not the only currency which was affected by yesterday’s disappointing global data sets. The New Zealand Dollar had started the weekly session with a whimper rather than a bang, sending the Pound to New Zealand Dollar exchange rate (currency : GBP NZD) up to close to 1.9200. However, the prospects of a higher likelihood of a continuation of the Fed’s asset purchase scheme sent the pair tumbling down to as low as 1.8954 by the middle part of the North American trading day. The GBP AUD exchange arte showed similar price action on the day, falling from its intraday high of 1.5860 down to 1.5721 by the latter part of the session.

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