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Pound Sterling US Dollar (GBP/USD) Exchange Rate Rises despite ‘Brexit Cloud’ Looming Over UK Services Sector

April 3, 2019 - Written by John Cameron

Pound US Dollar (GBP/USD) Exchange Rate Rises despite US Services Sector Stuck in ‘Quicksand’

The Pound Sterling US Dollar (GBP/USD) exchange rate rose this morning despite disappointing UK data and the pairing is currently trading at an inter-bank rate of $1.3178.

The UK services PMI revealed that business activity within the services sector declined for the first time in more than two and a half years in March.

The PMI slumped to 48.9, as new orders fell for the third month in a row and prices charged increased at the slowest pace since June 2017.

Commenting on the data, Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply said:

‘With the headline index posting just below 50 for the first time since July 2016 this month’s results are a seriously worrying development. New orders fell for the third consecutive month and a drop in overall business activity for the first time in two and a half years has left the services sector facing a bleak near-term outlook.

‘A fight for survival beckons if this market stagnation becomes entrenched, the global economy remains downbeat and the Brexit cloud is not lifted. With business expectations in the sector still close to the weakest seen over the past decade, this inertia will fast become the new normal unless some major change pulls the sector out of the quicksand.’

Sterling (GBP) Buoyed as PM Attempts to Break Deadlock

Prime Minister Theresa May is due to meet Jeremy Corbyn later on Wednesday to make an attempt to break the Brexit deadlock.

However, the Prime Minister’s move has angered some Brexiteers, including Conservative Boris Johnson who has accused her of ‘entrusting the final handling of Brexit to Labour.’

Theresa May has also announced that she would request a further short Brexit extension in order to get an agreement passed by Parliament before 22 May.

These announcements sparked hope that the UK would avoid a hard Brexit, which likely fueled an upswing in support for Sterling.

Safe-Haven US Dollar (USD) Falls as 90% of US-China Trade Deal Done

The safe-haven US Dollar (USD) slipped following reports suggesting that the US and China are closer than ever to a final trade agreement, increasing investors’ risk appetite.

Late on Tuesday it was reported that US and Chinese Officials have resolved the majority of the outstanding issues.

However, it was noted that they are still haggling over how to implement and enforce the agreement, with China requesting the US remove existing tariffs on Chinese goods.

Myron Brilliant, Executive Vice President for International Affairs at the US Chamber of Commerce told reporters that 90% of the deal is complete.

Pound US Dollar Outlook: Will the GBP/USD Exchange Rate Rise on a Disappointing US PMI?

Looking ahead to Wednesday afternoon, the US Dollar (USD) may slide against the Pound (GBP) following the release of the US ISM non-manufacturing PMI.

The ‘Greenback’ could be weighed down if March’s PMI reading drops to 58 from the previous 59.7 showing growth has begun to slow.

As there is a lack of further UK economic data releases this week, it is likely investors are going to remain focused on further Brexit developments.

If Theresa May is able to secure a short Brexit extension from the European Union it could spark the Pound US Dollar (GBP/USD) exchange rate to rise further.

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