Pound v US dollar: GBP slides against USD as markets await US jobs data

Pound v US dollar: GBP slides against USD as markets await US jobs data

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GBP/US rateGETTY

THE GBP/US exchange rate has fallen marginally to $1.286 today

The pound has been unmoved by the earlier construction PMI for May, which measures the level of activity in the sector.

Forecasts had been for the index to slow from 53.1 to 52.7, but the actual result was a surprise 56 points.

This has shown UK construction is growing at the fastest rate since December 2015, but current GBP/USD weakness shows that traders remain wary of committing to the pound.


The UK construction sector has started to recover strongly from its slow start to 2017

Tim Moore, Senior Economist at IHS Markit


Tim Moore, Senior Economist at IHS Markit, has analysed the data.

He said: “May’s survey data reveals that the UK construction sector has started to recover strongly from its slow start to 2017.

“House building was the key growth driver [and] a sustained rebound in residential building provides an encouraging sign that a recent soft patch for property values has not deterred new housing supply.”

Moore was not entirely optimistic about the result.

He said: “Commercial building was trapped in the slow lane, amid reports highlighting that heightened economic uncertainty is holding back client spending.”

Nonetheless, this forecast-beating result puts the UK construction industry in a good light, as it implies that Brexit-related import price increases – which have slowed to a seven-month low – are not limiting sector activity.

Less supportively for the pound, there has been some confusion about the Conservative Party’s immigration plans; the last thing the party needs as polls show its lead seemingly collapsing fast.

Pound notesGETTY

Pound coinsGETTY

The pound has been unmoved by the earlier construction PMI for May

The manifesto stated that the party was aiming to get net migration down ‘to the tens of thousands’, but did not give a date to meet this target.

Since then, Prime Minister Theresa May has stated that she will aim to hit the target by or before 2022.

However, Brexit Secretary David Davis has downgraded the 2022 date to an ‘aim’, rather than a promise.

With some polls predicting a tight contest between the Conservatives and Labour, even a minor slip-up on what is likely to be a key issue for many voters could increase the likelihood of a hung parliament.

The first UK news next week will be May’s services PMI.

If this shows a decline then the pound could tumble, as services are the UK’s largest economic sector.

US dollar billsGETTY

The US dollar has risen to £0.776 against the pound

The US dollar has risen to £0.776 against the pound on the back of enormous odds of monetary tightening from the June 14th Federal Open Market Committee (FOMC) monetary policy meeting.

Odds remain at 91.2 per cent and there is a strong chance they will rise higher on incoming US jobs stats, which will cover new job creation and unemployment in May.

If the non-farm payrolls report rises above forecasts, then the US dollar could appreciate further against the pound, as labour market strength is one of the most key influences upon the FOMC when setting monetary policy.

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