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Pound US Dollar (GBP/USD) Exchange Rate Steady, UK Services PMI Contracts in September

October 3, 2019 - Written by John Cameron

GBP/USD Exchange Rate Rangebound, Brexit and Global Slowdown Weighs on UK Services Sector

The Pound US Dollar (GBP/USD) exchange rate held steady today, with the pairing currently trading around $1.230 following the release of September’s UK Markit Services PMI which fell unexpectedly into contraction territory from 50.6 to 49.5.

Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply, was downbeat:

‘Momentum and optimism were in woefully short supply in September after many months of persistent uncertainty in 2019 pushed the Index below the no change mark. [A]s a result of Brexit uncertainty and a slowing global economy meant hard-pressed businesses started to lose their battle against the hardest conditions for about a decade.’

As a result, Sterling failed to gain against the US Dollar today as the British economy continues to underperform amid growing political uncertainties.

In political news, Prime Minister Boris Johnson’s newly formed Brexit deal has received a lukewarm response from the European Union, and after Mr Johnson stated that it was his ‘final’ offer, UK markets have become increasingly jittery over the prospect of a UK-EU no-deal.

Leo Varadkar, Ireland’s Prime Minister, was also sceptical regarding the Conservative Governments alternative Irish backstop proposal, further increasing doubts over the proposed withdrawal agreement.

USD/GBP Exchange Rate Steady on Flagging US Employment Data

The US Dollar (USD) failed to make any gains on Sterling after yesterday saw the US ADP employment figures all below expectations. The report showed that only 135,000 new jobs for September, with August’s revised down from 195,000 to 157,000.

Mark Zandi, Chief Economist at Moody’s Analytics, commented:

‘Businesses have turned more cautious in their hiring. Small businesses have become especially hesitant. If businesses pull back any further, unemployment will begin to rise.’

Meanwhile, US political uncertainties surrounding US President Donald Trump’s impeachment enquiry are also leaving US markets feeling cautious, with the Democrats accusing the White House of blocking inquiries and refusing to reciprocate requests for records.

In US economic news, USD traders will be looking ahead to today’s release of September’s ISM non-manufacturing PMI. Any signs of improvement, however, could bolster the USD/GBP exchange rate.

Today will also see the release of August’s US factory orders figures.

GBP/USD Outlook: Could Sterling Rise on US-EU Brexit Compromise?

US Dollar traders will be looking ahead to tomorrow’s release of September’s US nonfarm payrolls figures, which are expected to increase from 130,000 to 145,000.

Tomorrow will also see Jerome Powell, the Chairman of the Federal Reserve, deliver a speech. Any dovish comments about the US economy would likely weigh on the US Dollar.

Brexit developments will likely remain the main drive behind the GBP/USD exchange rate this week, with focus on the newly drawn-up Brexit withdrawal agreement. Should the EU show any signs of compromise on Boris Johnson’s proposed deal, we could see the Pound edge higher as the UK-EU political deadlock is challenged.

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