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Pound US Dollar (GBP/USD) Exchange Rate Soars as UK Manufacturing Exports Strengthen

February 1, 2018 - Written by John Cameron

UK Manufacturing PMI Reveals Export Growth, Pound (GBP) Strengthens



The Pound US Dollar (GBP/USD) exchange rate extended its lead on Thursday, strengthening despite a small contraction in the UK’s latest manufacturing snapshot.

Markit’s January UK manufacturing PMI revealed a drop to 55.3, down from December’s score of 56.2 and below the market forecast of 55.9.

Whilst this is indeed a contraction, the score remains well above both the long-running average of 51.7, and the 50 mark that separates expansion and contraction.

On another positive note the PMI also revealed that jobs in manufacturing were being added at a faster pace, and that new export order inflows were strengthening on the back of higher sale orders for clients in North America, China, Japan and the Middle East.

This trend of rising export orders is undeniably good news for the Pound, especially with foreign demand now rising at its fastest pace in over four years.

As a result, the overall reaction to this Markit PMI report was positive, with the GBP/USD exchange rate continuing to remain in the Pound’s favour.

US Fed Maintains Upbeat Outlook, US Dollar (USD) Exchange Rates Fail to Capitalise



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The US Federal Reserve announced that they will be keeping interest rates on hold on Wednesday in an attempt to stimulate faster economic growth and tease inflation out of its current lull.

Concluding their two-day meeting the central bank detailed their intentions to bolster job growth and US inflation levels - acknowledging the strong performance of the US economy but underlining the fact that it might be too fragile to warrant a rate hike at this point in time.

‘The stance of monetary policy remains accommodative, thereby supporting strong labour market conditions and a sustained return to 2 percent inflation’, the Fed said in a post meeting statement.

Nonetheless, the strong characterisation of the domestic economy was deemed by analysts to be a very ‘strong signal’ that the Fed is preparing for a rate hike as soon as March – a possibility that helped support the US Dollar later into the day.

On the domestic data front the number of Americans filing for unemployment benefits unexpectedly fell last week to 230,000, down from 231,000 in the previous period and below the market forecast of 235,000.

This news boded well for the US economy moving into 2018, especially when paired with recent news that the labour market is now near full employment (the overall jobless rate in the United States now sits at a 17-year low of 4.1%).

GBP/USD Exchange Rate Forecast: UBS Predicts BoE Rate Hike in May



The Pound US Dollar (GBP/USD) exchange rate could gather some speed towards May this year if the forecasts from the financial services company UBS prove true.

UBS now expects the Bank of England (BoE) to raise interest rates as soon as May – far earlier than economists had initially expected, with the group citing better than expected growth figures as the main reason for fresh optimism.

UBS Strategist John Wraith surmised this perspective in a published note, reading:

‘The better momentum the economy starts 2018… could give the Monetary Policy Committee a window of opportunity to raise bank rates by the middle of the year’.

This would be largely dependent on whether the UK government manages to secure a transitional deal with the EU by the end of March, however, an event that would quell uncertainty and hopefully increase business investment.

This positivity was also reflected in recent comments by BoE Governor Mark Carney, with Carney asserting that by 2019 the UK’s economy could see a pick-up, with strong global growth growing as uncertainty ebbs.

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