US Dollar to British Pound (USD/GBP) Exchange Rate Gains; US Manufacturing Surprises
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The pairing has fluctuated in the past few weeks, after the Pound’s time in the spotlight in the currency market came to an end and the US Dollar stepped in. The Pound had been fuelled by talks of interest rate hikes; however, as the Bank of England (BoE) became contradictory in their statements and the UK data performed poorly, Sterling crashed against its US counterpart.
The US Dollar however has been growing stronger against other majors as the Federal Reserve appears more hawkish, fuelling the possibility of interest rate hikes in the near future.
Tuesday saw the publication of better than forecast Purchasing Managers Index (PMI) figures, which have proved UK Composite PMI grew at a rate of 58.8 in July, higher than the forecast 58. Moreover, Services PMI managed to attain 59.1, much higher than the predicted 58.
Markit economist Chris Williamson stated: ‘The domestic economy clearly continued to boom in July.’ As both figures attained over the 50 benchmark that indicates expansion.
Williamson continued: ‘The sustained strength of growth will add to calls for interest rates to start rising later this year.’
However, the prospect of interest rate hikes is highly speculated about in the currency world, with some believing the UK economy has more slack than the Bank of England have accounted for.
A policy maker for the BoE, Sushil Wadhwani, commented: ‘There’s no way I can begin to understand why wages are so low.’
The UK will publish Industrial and Manufacturing Production figures on Wednesday followed by Gross Domestic Product Estimate which could all cause the Pound to boost against other majors.
The US however has published the Non-Manufacturing Composite Index for July on Tuesday which reached a staggering 58.7, bypassing the forecast 56.5.
Such favourable US data could fuel the interest rate hike speculation amongst economists, and the Federal Reserve may become more hawkish in their stance.
The GBP to USD exchange rate is trending at 1.6857, however the currency pairing will experience great fluctuation on Thursday dependant on the Bank of England’s policy makers decision.