Pound US Dollar Exchange Rate Hovers around Three-Decade Lows

Modified: Thursday, 6 October 2016 11:35 BST - Written by Toni Johnson

STORY LINK Pound US Dollar Exchange Rate Hovers around Three-Decade Lows

The Pound to US Dollar exchange rate has remained limp since Wednesday, as increasing demand for the US Dollar left Sterling reeling from the Brexit-panic induced selloff that it experienced earlier in the week.

GBP/USD has lost around two cents in value since markets opened this week. On Wednesday morning, the pair hit a new 31-year-low of 1.2692. However, as 1.27 seems to be a level of key psychological resistance, GBP/USD has attempted to hold above this level since.

Pound (GBP) Exchange Rates Weak Despite Optimistic UK Data

Despite impressive British data published throughout the week, Sterling has struggled to escape from 2016 lows against many major currencies due to investor panic that Britain will give up access to the European Union’s single market after the Brexit is complete.

Wednesday’s data saw UK September PMIs completing a hat-trick of better-than-expected results, as Services beat expectations of a drop to 52.2 by only falling from 52.9 to 52.6. As a result, Britain’s overall Composite PMI for September improved month-on-month, from 53.6 to 53.9.

This figure was not enough to bolster Sterling demand however. The currency eventually made a limited recovery attempt on Wednesday afternoon after UK Prime Minister Theresa May criticised ultra-low interest rates.

This cheered some critics of the Bank of England’s (BoE) aggressive August stimulus package, and gave Sterling some footing on which to attempt a recovery.

US Dollar Pound Sterling (USD GBP) Exchange Rate Strengthens on US Data, Fed Bets

The US Dollar has become an increasingly difficult rival for the Pound to tackle this week, as surprisingly upbeat US ecostats have impressed investors and caused an uptick in bets that the Federal Reserve will hike US interest rates in December.

Wednesday’s session saw a slew of better-than-expected US data. While ADP’s employment change reported a slow to 154k in September, other economic activity stats printed surprisingly strongly.

Markit’s final September US Services PMI beat preliminary scores of 51.9, reaching 52.3. This dragged the Composite score up, which also hit 52.3.

ISM’s Non-Manufacturing Composite PMI was especially impressive, soaring from August’s disappointing 51.4 score to a high 57.1 in September.

The day’s August data was also strong. August factory orders beat expectations of a -0.2% contraction, reaching 0.2%. Meanwhile, August’s final durable goods orders report beat forecasts of 0.0% stagnation by scoring a slow 0.1%.

GBP/USD Currency Forecast: Key Non-Farm Payroll Report Due Friday

The US Dollar looks to hold its ground throughout Thursday’s trade, and could attract more market attention as Friday’s key American session approaches.

Friday morning will see the publication of various British datasets which could inspire Sterling movement. This includes August’s industrial and manufacturing production prints, as well as data on August’s UK trade balances.

Investors will be eager to see whether or not the Pound’s low value has made a strong difference on the account deficit yet. Many predicted it would in July, but the deficit lightened less-than-hoped. NIESR will publish its September UK Gross Domestic Product (GDP) estimate later in the day.

Most of the day’s market movement will likely be driven by the US Dollar however, as markets will be bustling amid the publication of September’s highly anticipated US Non-Farm Payroll prints during the American session.

After a sturdy few months, August’s NFP report disappointed investors. Many will be hoping for an improvement in September’s scores, which would certainly add to bets of a December Fed interest rate hike.

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