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Pound US Dollar (GBP/USD) Exchange Rate Edges Higher as US Manufacturing PMI Underwhelms

August 3, 2021 - Written by John Cameron

GBP/USD Exchange Rate Rises as US Manufacturing Growth Cools

The Pound US Dollar (GBP/USD) exchange rate edged higher today following yesterday’s lacklustre US ISM manufacturing PMI for July, which fell below forecasts from 60.6 to 59.5, sparking concerns for the world’s largest economy. The pairing is currently fluctuating around $1.38.

The US Dollar (USD) struggled against Sterling following signs of cooling in US manufacturing growth. This has dented confidence in the outlook for the US economy, leaving investors weary of the ‘Greenback’.

Chris Low, chief economist at FHN Financial in New York, explains:

‘Manufacturing is slowing from unsustainable boom to sustainable strength.

‘Moderation in supplier deliveries and prices paid indicate bottlenecks are alleviating, but both remain high enough to indicate supply-side problems persist. Still, from a markets and policy perspective, progress is important.’

In focus today, the latest US factory orders data for June could pick-up and lend support for the USD/GBP exchange rate.

Today will also see a speech from the Federal Reserve’s Michelle Bowman, a member of the Fed’s board.

Could a bullish outlook from a key member of the Federal Reserve see demand for the US Dollar increase?

Pound (GBP) Exchange Rate Rises as UK Covid-19 Infections Fall

The Pound (GBP) rose against the US Dollar (USD) today as daily Covid-19 infections throughout the UK continue to fall. However, deaths from the virus in England and Wales have hit a three-month high.

Jamie Jenkins, former head of health statistics at the Office for National Statistics (ONS), expressed optimism about the UK’s coronavirus situation, however, saying that we could be ‘over the edge’.

Jenkins told LBC:

‘I think looking at the data, we normally see deaths peaking around 14 days after cases come down, I think we might start being over the hill now when it comes to deaths.

‘We probably are over the edge of the wave at the moment but let's have a bit of caution as we go into the autumn period.’

An improving outlook for the UK’s coronavirus situation has contributed to the strength in the GBP/USD exchange rate today.

But an absence of UK economic data until later this week we could see the Pound begin to fall.

With the currency being effectively rudderless – in terms of economic data – until Thursday’s interest rate decision from the Bank of England (BoE).

GBP/USD Exchange Rate Outlook: Could Falling US Unemployment Boost the ‘Greenback’?

US Dollar (USD) investors will be awaiting tomorrow’s release of the latest US ADP employment change data for July.

Any signs of falling levels of unemployment in the US would see the USD/GBP exchange rate head higher.

Tomorrow will also see the release of the latest US ISM services PMI figure for last month. Could an uptick in the US services sector boost the ‘Greenback’?

Pound (GBP) investors will look ahead to Thursday’s interest rate decision from the Bank of England (BoE).

The GBP/USD exchange rate could head higher this week, however, if UK Covid-19 rates continue to fall, as this could see a more hawkish monetary policy statement from the BoE.

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TAGS: American Dollar Forecasts Pound Dollar Forecasts

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