Pound US Dollar Exchange Rate News: GBP/USD Trades Higher as UK PMIs Print Better Than Expected

February 21, 2022 - Written by John Cameron

STORY LINK Pound US Dollar Exchange Rate News: GBP/USD Trades Higher as UK PMIs Print Better Than Expected

GBP/USD Bolstered as UK PMI Flash Data Exceeds Predictions

The Pound US Dollar (GBP/USD) exchange rate is trading higher today as the UK’s Markit manufacturing and services PMI for February print higher than expected.

At the time of writing, the GBP/USD exchange rate is trading at approximately $1.3636, up roughly 0.3% from today’s opening levels.

Pound (GBP) Boosted as PMI Overshoots Forecast

The Pound (GBP) is rising against the US Dollar (USD) this morning as February’s services and manufacturing PMI both beat expectations.

The services PMI printed at 60.8 this month, up from 54.1 in January and significantly above forecasts for a more modest rise to 55.5.

Travel, leisure and entertainment experienced the highest demand for business service, enabling new order growth to accelerate throughout the month.

Meanwhile, the manufacturing PMI remained unchanged at 57.3, rather than slipping to 57.2 as forecast.

Manufacturing factory outputs increased by the largest amount since July 2021, due to material availability and high levels of restocking, however the industry’s capability was limited by staff shortages.

The Pound US Dollar exchange rate is firming on the back of this morning’s PMI releases as they further bolster expectations the Bank of England (BoE) will hike interest rates again in March.

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

‘The latest PMI surveys indicate a resurgent economy in February, as business activity leapt as COVID-19 containment measures were relaxed.

‘With the PMI’s gauge of output growth accelerating markedly in February and cost pressures intensifying to the second highest on record, the odds of an increasingly aggressive policy tightening have shortened, with a third back-to-back rate rise looking increasingly inevitable in March.’

US Dollar (USD) Weakens on Easing Ukraine Tensions

The US Dollar (USD) is down against the Pound (GBP) this morning amidst hopes for a diplomatic solution to the Ukraine crisis.

US President, Joe Biden, and his Russian counterpart, Vladimir Putin, have agreed ’in principle’ to hold a summit aiming to discuss and settle the current situation in Ukraine.

This is easing geopolitical tensions this morning, with the resulting risk-on mood causing investors to shy away from safe haven currencies.

The White House spokeswoman, Jen Psaki, said:

‘President Biden accepted in principle a meeting with President Putin following that engagement, again, if an invasion hasn’t happened.

‘We are always ready for diplomacy. We are also ready to impose swift and severe consequences should Russia instead choose war. And currently, Russia appears to be continuing preparations for a full-scale assault on Ukraine very soon.’

On the other hand, the Dmitri Peskov, Putin’s spokesperson, has stated that it’s ‘premature to talk about specific plan’ which may be limiting the US Dollar’s losses.

Elsewhere, the closure of US markets for President’s Day could limit USD trading volumes today.

GBP/USD Exchange Rate Forecast: Will Fed Speech Influence USD?

Later today, a speech from Federal Reserve policymaker, Michelle Bowman, could drive some movement in the Pound US Dollar exchange rate. A hawkish tone from Bowman could bolster the ‘Greenback’.

The publication of the US Markit manufacturing and services PMI data may influence the USD exchange rates tomorrow should there be a major discrepancy between market expectations and February’s preliminary figures.

In the meantime, BoE policymaker, Dave Ramsden, is scheduled to deliver a speech tomorrow morning. If Ramsden’s appears supportive of another rate hike next month the Pound may rally.

In addition the GBP/USD exchange rate is likely to remain susceptible to Russia-Ukraine developments.

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TAGS: Pound Dollar Forecasts