Pound US Dollar (GBP/USD) Exchange Rate Sinks as US Factory Output Improves in December

January 2, 2020 - Written by John Cameron

STORY LINK Pound US Dollar (GBP/USD) Exchange Rate Sinks as US Factory Output Improves in December

GBP/USD Exchange Rate Edges Higher as US Economy Starts Off on ‘Softer Footing’

The Pound US Dollar (GBP/USD) exchange rate fell by -0.6% today, with the pairing currently trading around $1.315 after the US factory output figure showed a slight expansion at 52.4 in December.

Chris Williamson, Chief Business Economist at IHS Markit, comments:

‘The US manufacturing sector continued to recover from the soft-patch seen in the summer, ending 2019 with its best quarter since the early months of 2019.

‘The overall rate of expansion nevertheless faltered somewhat in December and remains well below that seen this time last year, suggesting producers are starting 2020 on a softer footing than they had enjoyed heading into 2019.’

As a result, US markets reacted favourably as the New Year promises some improvement for one of America’s largest sectors.

Today also saw the US Initial Jobless Claims for December beat forecasts at 222 thousand, providing further uplift for the USD/GBP exchange rate.

Meanwhile, American markets have remained fixated on US-China trade developments following US President Donald Trump’s that a phase one trade deal could be secured on 15th January.

Any signs of improving relations between the world’s two largest economies, however, could weaken the safe-haven ‘Greenback’ as investors seek out riskier assets instead.

GBP/USD Exchange Rate Sinks as UK Manufacturing PMI Falls Below Forecasts

The Pound (GBP) has remained subdued today after this morning’s publication of the UK Markit Manufacturing PMI figure for December, which fell below forecasts at 47.5.

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

‘The pace of manufacturing’s decline in December will set alarm bells ringing as production levels sank at their fastest levels since July 2012 and with no sign of immediate recovery in sight.’

Brexit has remained at the forefront of British market concerns, however, with the 31st January exit from the European Union continuing to hold back the Pound as investors become increasingly jittery over the future for the UK economy.

GBP/USD Outlook: Brexit Developments in Focus

US Dollar (USD) investors will be awaiting tomorrow’s release of the US ISM Manufacturing PMI, which is expected to improve from 48.1 to 49. As a result, we could see the ‘Greenback’ rise further against the struggling Sterling.

Tomorrow will also see the release of The Federal Market Open Market Committee’s (FOMC) minutes. Any dovish commentary about the state of the US economy, however, could clip some of the US Dollar’s gains.

Sterling traders, meanwhile, will be keeping a close eye on Brexit developments this week, with any further signs that the UK economy could face challenges in the coming year weakening the GBP/USD exchange rate.

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TAGS: American Dollar Forecasts Dollar Pound Forecasts