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Pound US Dollar Exchange Rate News: GBP/USD Rises amid Positive Data

December 6, 2021 - Written by John Cameron

GBP/USD Rises amid Three-Month-High for Construction Sector

The Pound to US Dollar (GBP/USD) exchange rate has risen since the opening of today’s European session.

At the time of writing, the GBP/USD exchange rate is trading at $1.3258 with a market movement of 0.2%.

Pound (GBP) Strengthened by Better-Than-Expected Data

The Pound (GBP) began today’s session by trending upward against the US Dollar (USD) due to the UK’s positive construction data, as well as the risk-on mood weakening safe-haven demand for USD.

The UK construction PMI printed at 55.5 for November, an increase from the previous month’s 54.6 and higher than the forecast of 54.2.

Growth for new business hit a three-month high, while strong expansion throughout the construction sector was driven by economic recovery with the approval for new projects, whilst shortages eased.

Tim Moore, director at IHS Markit, said:

”Input price inflation remains extremely strong by any measure, but it has started to trend downwards after hitting multi-decade peaks this summer.

“The latest rise in purchasing costs was the slowest since April, helped by a gradual turnaround in supply chain disruption and a slight slowdown in input buying. Port congestion and severe shortages of haulage capacity were again the most commonly cited reasons for longer lead times for construction products and materials.”

However, GBP gains look limited by ongoing supply chain issues which are impacting UK businesses.

British firm accountancy firm, BDO, discovered that 80% of medium-sized businesses are expecting their end-of-year trade to be negatively impacted by bottleneck supply chains as well as increasing energy and fuel costs.

US Dollar (USD) Subdued Despite Fed Rate Hike Expectations

At the same time, the US Dollar (USD) has slipped against the majority of its peers this morning amid risk-on sentiment, causing investors to largely ignore the safe-haven currency.

The US Federal Reserve’s potential monetary policy tightening has limited USD losses however, as investors anticipate an acceleration of the Fed’s tapering of its bond-buying programme and an early interest rate hike.

Spenser Lerner, head of Multi Asset Solutions at Harbor Capital Advisors, said:

‘The internals of the market are starting to reflect a faster rate hiking cycle and it's the longer-duration growth stocks that are really selling off.’

Comments from Fed Chair, Jerome Powell, hinted at increased rate hike bets after he announced last week that the next meeting will discuss the potential speeding-up of tapering the government’s bond buying program.

Powell further implied that ‘transitionary’ should not be used when referring to current U.S inflation trends anymore.

Powell said:

We tend to use [transitory] to mean that it won’t leave a permanent mark in the form of higher inflation. I think it’s probably a good time to retire that word and try to explain more clearly what we mean.

The ‘Greenback’ is also facing some headwinds from November non farm payrolls data which showed an increase of 210K jobs instead of the forecast 550K, however this was offset by October’s unemployment fall from 4.2% to 4.6% and the ISM non-manufacturing PMI unexpectedly hitting a record high.

GBP/USD Exchange Rate Forecast: Will Strong USD Data Promote Positive Market Movement?

Looking ahead, the Pound US Dollar exchange rate may come under pressure from US data to be printed throughout the week.

The ‘Greenback’ might receive support from October’s balance of trade which is forecast to show a narrowing trade deficit of $-67bn, an improvement on the previous month’s $-80.9bn.

A predicted drop in initial jobless claims from 238.75K to 227.75K could also offer USD support. Meanwhile, JOLTs job openings are expected to remain near record highs amid the US labour shortage, likely driving movement in the US Dollar.

On the other hand, the Pound has few UK data releases due to be released in the coming days. At the end of the week, GBP may be buoyed by mixed data forecasts. October’s trade deficit is forecast to widen from £-2.8bn to £-3.2bn whilst October’s industrial production is expected to increase from -0.4% to 0.2%.

On Friday, UK’s October GPD is likely to influence the GBP investors’ as growth is forecast to slow from September’s 0.6 to 0.5%.

Sterling’s other influences will largely come from media headlines with regards to ongoing issues such as Omicron research, Brexit and bottleneck supply chains.

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