USD/GBP, USD/EUR Exchange Rate Forecast: US Dollar Trends Lower, Jobs Data Likely to Spark Movement

Posted by Josephine Ottaway on December 1, 2014 at 3:58 pm

Last updated on December 1, 2014 at 4:49 pm

On Monday both the US Dollar to Pound (USD/GBP) and US Dollar to Euro (USD/EUR) exchange rates softened.

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Pound Sterling (GBP) Boosted by Manufacturing Gain

The US Dollar to Pound Sterling (USD/GBP) exchange rate weakened on Monday as the British currency was boosted by a stronger-than-expected manufacturing PMI.

The news that the UK’s manufacturing sector expanded at the most rapid rate for four months in November kept Sterling trending higher against its peers.

Pound gains were only slightly limited as the level of UK Mortgage Approvals fell to its lowest for over 12 months.

The USD/GBP exchange rate fell by around 0.6%, hitting a low of 0.6342 over the course of trading.

Further USD/GBP movement was occasioned by US manufacturing data.

Euro (EUR) Trends Higher Despite PMI Revisions

Although manufacturing PMI’s for the Eurozone as a whole and Germany were negatively revised on Monday, the Euro failed to decline against the US Dollar.

The Euro was boosted last week by hints that the European Central Bank (ECB) will refrain from introducing additional stimulus at this week’s meeting and the common currency clung to these gains over the Thanksgiving weekend.

However, if that supposition proves to be false and the ECB does in fact roll out full-scale bond buying, the Euro is likely to weaken across the board and the US Dollar may recover losses.

US Manufacturing Data Mixed, US Dollar Advances on Commodity Currencies

The US Dollar experienced some movement during Monday’s North American session as the US published both Markit and ISM manufacturing PMI’s. The Markit measure of manufacturing was revised from 54.7 to 54.8, an improvement but not quite the increase to 55 anticipated.

The ISM Manufacturing index, on the other hand, fell by less than expected in November. A decline from 59 to 58.0 had been expected, but the figure actually registered at 58.7.

Markit economist Chris Williamson noted; ‘The final PMI came in slightly ahead of the earlier flash estimate, confirming a solid expansion of manufacturing activity in November. However, although still reasonably strong, the pace of growth has slowed for three successive months, taking it down to the slowest since January, when business was hit by extreme weather arising from the Polar Vortex. This time, there was little anecdotal evidence from companies of the weather affecting business.’