The Pound Sterling to US Dollar (GBP/USD) exchange rate touched its best level in a week on Wednesday following the release of data, which showed that activity in the UK’s dominant services sector rose more than forecast in January.
The GBP/USD exchange rate hit a session high of 1.521
According to Markit/CIPS, the Services Purchasing Managers Index (PMI) climbed to a figure of 57.2 last month, up from the reading of 55.8 in December. Economists had been forecasting for the index to rise to a figure of 56.3.
The positive index follows similar data released earlier in the week, which showed that activity in the UK’s construction and manufacturing sectors increased more than forecast in the first month of the year. The Construction PMI climbed to a reading of 59.1, whilst the Manufacturing PMI climbed to 53.0.
‘The January PMI surveys signalled a reassuringly robust start to the year for the UK economy, indicating a quarterly rate of GDP growth of just over 0.5%. The data will allay fears that the economy is slowing sharply, having merely seen growth cool during the winter to a more sustainable pace. Even more encouraging is the upturn in employment. The surveys are currently signalling an impressive net rate of job creation of approximately 70,000 per month,’ said Markit chief economist Chris Williamson.
Despite the better than expected PMI reports, Markit said that due to low inflation, the likelihood of the Bank of England hiking interest rates any time soon was very slim. They now expect rates to rise in early 2016.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast
The gains achieved by the Pound are likely to continue, as market attention will now shift to data releases due from the USA. The Adp Employment change and ISM Non-Manufacturing PMI reports will be the most important.
Economists are forecasting that both sets of data will show declines from the preceding month with the ADP report falling from the 241,000 figure to a reading of 233,000. The PMI meanwhile is expected to show that activity slowed slightly 56.5 to 56.2.
Geo political events such as the escalating war in eastern Ukraine and Greece’s negotiations with the European Central Bank and International Monetary Fund are also likely to influence the exchange rate.
