GBP/USD Conversion Rate Struggles to Capitalise on Sizeable Downturn in US Manufacturing
A worse-than-anticipated result on the US Manufacturing PMI today has not particularly supported the strength of the ‘Greenback’ (USD), as the index registered a noticeable drop to 51.1 rather than a more minor decrease to 52.7.
Unemployment in the Eurozone, meanwhile, has dropped to 10.9%, its lowest level in three years as the majority of the commodity bloc’s member states posted improvements.
Currently the GBP/USD exchange rate is continuing to trend narrowly in the range of 1.5333, with the GBP/EUR pairing remaining in a downtrend at 1.3615.
Interest rate speculation continues to dog the ‘Greenback’ (USD) as the Pound (GBP) and Euro (EUR) are impacted this morning by disappointing Manufacturing PMIs.
GBP/EUR Exchange Rate Still Faltering Today as UK Manufacturing PMI Proves Worse than Expected
Some of the more negative speculation on the possibility of imminent monetary loosening from the European Central Bank (ECB) has begun to die off at the start of this week, after having boosted the GBP/EUR exchange rate to 1.3774 and recouping most of the pairing’s losses ahead of the weekend. As the global stock markets have begun to stabilise in the wake of Black Monday’s major declines the necessity of Eurozone interest rate cuts appears to have dwindled, somewhat reassuring pundits who had been moving away from the single currency (EUR).
Saturday saw Bank of England (BoE) Governor Mark Carney attempting to bolster the outlook of the Pound (GBP), avoiding dovish talk to maintain that an interest rate rise is still on track for the early months of 2016. Downplaying the effect of China’s stock turmoil and the global slowdown on the domestic UK economy, he appeared to hold confidence in the probability of improvement and a further increase in inflation which could bode well for the outcomes of future Monetary Policy Committee (MPC) meetings. A lack of supporting evidence, though, meant that Sterling derived little to no particular boost from the speech.
As yesterday’s Eurozone Consumer Price Index printed better than expected, with core inflation remaining at the previous month’s level of 1.0% rather than falling to 0.9% as predicted, the common currency was naturally strengthened. Pushing the GBP/EUR exchange rate down, this data set the pairing on a downtrend from which it is still struggling to recover.
This morning, however, demonstrated that the commodity bloc’s economic growth is far from stable as the final Manufacturing PMI figure for August was published. In spite of a strong performance in Germany, fresh declines in France and Greece pulled the composite down to 52.3, rather than holding it stable at 52.4. Any positive impact this might have ultimately had upon the GBP/EUR pairing, however, was swiftly mitigated by the UK’s equally weak Manufacturing PMI that demonstrated a definite slowing of output at 51.5 rather than the modest improvement that had been forecast.
At time of writing the Pound Sterling to Euro (GBP/EUR) pairing continues to slump around 1.3603, with the Euro to Pound Sterling (EUR/GBP) conversion rate trending strongly at 0.7345.
Future Currency Forecast: Possibility of Imminent US Interest Hike Remains as Continued Chinese Slowdown Fails to Weigh on the ‘Buck’ (USD)
The ‘Greenback’ (USD), on the other hand, was struck by more dovish sentiment from key Federal Open Market Committee (FOMC) board members speaking at the Jackson Hole summit. Vice Chairman Stanley Fischer, while not conclusively ruling out the possibility of a September take-off, admitted that the level of domestic inflation remains below the Fed’s 2% goal. Although the general feeling amongst policymakers seems somewhat cautiously optimistic, the probability of an interest rate hike before the end of 2015 remains mixed. While this initially prompted the GBP/USD exchange rate to climb slightly, the pairing continued to trend in the region of a two-month low.
As both the Chinese Manufacturing and Services PMIs showed further declines today the situation on the rest of the world’s stock markets could be facing a return to turbulence, with the FTSE 100 and other European markets dropping back into the red this morning. Should the Dow Jones buck the general trend, however, investors could easily be encouraged to pile back into the traditional safe-haven currency once more.
With the US Manufacturing PMI and Construction Spending figures due out this afternoon as well the GBP/USD pairing could stand to see some significant movement, particularly if the data proves to be equally disappointing to yesterday’s shortfalls on the Chicago Purchasing Manager index and Dallas Fed Manufacturing Activity.
Currently the Pound Sterling to US Dollar (GBP/USD) exchange rate is in a narrow downtrend at 1.5335, while the US Dollar to Pound Sterling (USD/GBP) pairing is climbing at 0.6520.