Pound to US Dollar (GBP/USD) Exchange Rate rises as Chicago PMI data disappoints

The Pound to US Dollar (GBP/USD) exchange rate edged higher on Monday after the Chicago manufacturing purchasing managers index came in below forecasts.

According to the market Institute for Supply Management its Chicago PMI fell to a seasonally adjusted figure of 55.9 this month, down from the previous figure of 59.8. Economists had been expecting the figure to come in at 59. The figure was the lowest reading seen in eight months.

Any figure 50 in PMI data indicates expansion, whereas one below indicates contraction.

The weaker than expected report could dampen optimism that the world’s largest economy is shaking off the impacts of the winters extreme weather conditions.

“March saw a significant weakening in activity following a five month spell of firm growth. It’s too early to tell, though if this is the start of a sustained slowdown or just a blip,” said MNI Indicators Chief economist Philip Uglow.

The ‘Greenback’ was also weakened as Federal Reserve Chairman Janet Yellen addressed the National Interagency Community Reinvestment Conference in Chicago.

She said that the Federal Reserve’s unprecedented monetary easing policy will be needed for time due to ‘considerable slack’ in the nation’s labour market.

“This extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policymakers at the Federal Reserve. The scars of the Great Recession remain, and reaching our goals will take time,” Yellen said.

The US Dollar is likely to see volatility tomorrow if the latest Manufacturing PMI reports come in weaker than forecast. A run of bad data is likely to see the Fed curtail its tapering of its quantitative easing programme, a move that would weaken the ‘Greenback’.