GBP/USD Conversion Rate Predicted to Soften despite Better-than-Anticipated Services Output
The Pound Sterling to US Dollar (GBP/USD) exchange rate edged lower by around -0.3% on Wednesday afternoon.
During Wednesday’s London session the Pound Sterling advanced versus the majority of its most traded currency rivals. This is mainly due to better-than-expected results from the Services and Composite PMIs. October’s Services PMI, which rose from 53.3 to 54.9, was particularly significant given that British Gross Domestic Product is primarily driven by the services sector. Also supporting demand for the British asset was the Composite PMI which bettered estimates at 55.4 in October; reinforcing hopes of a sooner-than-expected Bank of England (BoE) benchmark interest rate hike.
In response to the Services PMI, David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply stated; ‘Good news for jobseekers and those looking for a pay rise in the service sector this month as a rise in the headline index signalled faster growth, albeit at more a muted pace than in manufacturing and construction. The rate of staffing growth rose to a five-month high and was faster than the average over the 19-year survey history. Respondents cited some difficulty in finding skilled staff so were willing to offer higher salaries to good candidates. The requirements of the Living Wage also contributed to higher input charges while material prices remained subdued.’
The Pound Sterling US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5377.
USD/GBP Exchange Rate Forecast to Hold Gains after US ISM Non-Manufacturing Composite Surges
Thus far during Wednesday’s European session the US Dollar ticked higher versus its major peers following a positive reading from October’s ADP Employment Change. Eclipsing the median market forecast for 180,000 newly employed, October’s actual result saw 182,000 added to the US labour force. Employment Change data is used as an early indication for Change in Non-Farm Payrolls. Traders have linked consistent improvement in US labour market conditions to the first Federal Reserve overnight cash rate increase.
Additional US Dollar gains can be attributed to the ISM Non-Manufacturing Composite which defied the market consensus of a drop from 56.9 to 56.5 in October, with the actual result reaching 59.1. This will further stoke hopes that Federal Open Market Committee (FOMC) members can afford to be more hawkish in their policy outlooks.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast: ‘Super Thursday’ to Provoke Volatility
Looking ahead, the Pound Sterling to US Dollar (GBP/USD) exchange is likely to see subdued trade ahead of ‘Super Thursday’ which will see the BoE Interest Rate decision accompanied by the publication of meeting minutes and the quarterly Inflation Report. In terms of US data, Thursday’s labour market data will be of interest.
Friday is likely to see significant GBP/USD volatility with the publication of British trade data and US Non-Farm Payrolls. As explained above, many investors see improvement in US NFP as a prerequisite for tighter monetary policy conditions.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within the range of 1.5378 to 1.5445.
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