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GBP/USD Forecast: Pound to US Dollar Exchange Rate Weakens on Sour Market Mood

September 6, 2021 - Written by John Cameron

The Pound to US Dollar (GBP/USD) exchange has weakened today as a disappointing PMI reading from UK did little to support Sterling appeal.

At the time of writing the GBP/USD pairing are trading at around $1.3838 level as a sour market mood and positive rise in US treasury yields bolsters the ‘Greenback’.

Pound Sterling (GBP) Exchange Rate Muted on UK Construction PMI

The Pound has been muted against the US Dollar for much of the day as the latest UK construction PMI reading showed growth in the sector slowed.

The construction PMI reading for August showed that growth in the sector softened to 55.2, missing forecasts of 56.9.

Usamah Bhatti, Economist at IHS Markit, commented on the latest PMI data, saying:

‘Evidence that the UK construction sector began to feel the impact of ongoing supply chain disruption was widespread midway through the third quarter of 2021. Growth rates for overall activity as well as the three monitored subsectors eased further from the recent highs earlier in the summer.’

‘Similarly, new business inflows have continued to increase at a marked pace, yet even here the rate of growth has eased to a five-month low. Supply chain disruption continued to disrupt activity across the UK construction sector, as demand for materials and logistics capacity outstripped supply.’

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, also commented on the figures:

‘Formidable supply chain pressures restrained purchasing activity and building projects across the board in August as 68% of construction companies reported even longer delivery times for materials compared to July. A combination of ongoing covid restrictions, Brexit delays and shipping hold-ups were responsible as builders were unable to complete some of the pipelines of work knocking on their door.’

US Dollar (USD) Exchange Rate Supported by Sour Market Mood

The US Dollar has been supported at the start of this week as a sour market mood bolsters the ‘Greenback’.

Furthermore, a sharp rise in US treasury yields provided further headwind for USD exchange rates to push higher.

It comes as markets and investors alike believe that the Federal Reserve will taper its pandemic stimulus sooner than expected.

A volatile Euro has limited any major US Dollar gains today as the negative correlation between the pairing causes the USD to fluctuate.

GBP/USD Exchange Rate Forecast: Manufacturing PMI’s in Focus

An absence of economic data from the US will see investors keeping an eye on the global market mood during tomorrow’s European trading session.

Pound traders will be awaiting the latest Halifax house price index tomorrow morning to drive movement in GBP exchange rates.

The GBP/USD pairing will continue to be driven by any further coronavirus developments during next week’s trading.

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