Pound Sterling (GBP) Weakens Today as Chancellor Emphasises Risks to UK Economic Growth
Chancellor of the Exchequer George Osborne has helped to push the Pound (GBP) lower against rivals on Thursday morning, after making some decidedly less optimistic comments with regards to the UK’s economic outlook. Stressing the downside risks to the domestic economy Osborne has done little to rescue the currency from its recent bearishness, prompting both the GBP/EUR and GBP/USD exchange rates to downtrend today.
GBP/USD Exchange Rate Bearish after US Employment Betters Forecast Today
After the December ADP Employment Change revealed that 257,00 new jobs had been added to the private sector in the US the ‘Greenback’ (USD) has continued to dominate the Pound (GBP). Consequently the GBP/USD exchange rate remained in a slump around 1.4623, while the GBP/EUR pairing was weakening in the range of 1.3593.
As the US Dollar (USD) has been climbing against rivals due to increased safe-haven demand this morning the Pound (GBP) has generally softened following a discouraging UK Services PMI.
Weaker UK Services PMI Prompts Pound Sterling (GBP) Slump Today
Although Tuesday saw some measure of optimism return to the Pound (GBP) in the wake of a stronger-than-expected UK Construction PMI it was ultimately not long before the currency returned to a weaker footing. While the output of the construction sector rose from 55.3 to 57.8 in December, signalling a strong expansion, the impact of the bullish figure was somewhat mitigated by the sector’s more limited contribution to the national GDP.
Pundits were far more concerned this morning by the revelation that the latest Services PMI had fallen further than forecast, clocking in at 55.5 to suggest that growth was slowing. This does not bode particularly well for the fourth quarter GDP, and implies that the Bank of England (BoE) is likely to take a more dovish approach to monetary policy in the coming months. Consequently Sterling has been trending lower against both the Euro (EUR) and US Dollar (USD) today.
Euro (EUR) Exchange Rates Advance after Eurozone Growth Hits Four Year High
Traders were reassured by the news that the Eurozone’s Composite PMI climbed to a four-and-a-half year high in December, in spite of a minor contraction in the French service industry. This particularly strong showing of economic growth helped to allay some of the concerns that had arisen in response to yesterday’s Eurozone Consumer Price Index disappointing expectations. Inflationary pressure within the currency union failed to climb on the year, holding steady at 0.2% at the end of 2015, giving the European Central Bank (ECB) more impetus to loosen monetary policy afresh.
Nevertheless, as the outlook of the Eurozone’s economy appears to be relatively positive, the single currency has been bolstered against many of the majors on Wednesday.
US Dollar Currency News: USD Shored up as Chinese Slowdown Concerns and Safe-Haven Demand Rise
The US Dollar has been on bullish form overnight after a sharp drop in growth was evidenced by the Chinese Services PMI and North Korea announced the apparent testing of a hydrogen bomb. Safe-haven demand naturally increased in the wake of these developments, while the Yuan (CNY) dropped to its lowest level in five years. As China has previously stated its desire to move towards a more service-based economy this latest sign of persistent weakness has sparked fresh slowdown concerns, pushing the ‘Greenback’ higher even as questions mount over the future interest rate policy of the Federal Open Market Committee (FOMC).
As traders anticipate a slight uptick in the US ISM Non-Manufacturing Composite this afternoon the US Dollar is likely to make further gains across the board, benefitting from an atmosphere of risk aversion and worry.
Current GBP, EUR, USD Exchange Rates
At time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending narrowly around 1.3644, while the Pound Sterling to US Dollar (GBP/USD) pairing slumped in the region of 1.4648. Meanwhile, the Euro to US Dollar (EUR/USD) exchange rate was ceding ground at 1.0732.