British Pound Strengthens on Revised UK PMI, Softer USD
The British pound strengthened against other major currencies on Wednesday with the continuous loss of the US dollar’s safe haven features in the forex markets.
According to forex trading data obtained, the sterling rose to 1.3289 against the U.S. dollar, from an early low of 1.3218 amidst expectations of a US Federal Reserve rate cut next week.
The GBPUSD pair gathered momentum after the UK’s final services purchasing manager index (PMI) for November was revised up from preliminary estimates. The PMI came in at 51.3, up from the flash score of 50.5, but still slowing from October’s reading of 52.3.
Despite the positive headline readings, business activity slowed and employment fell at the fastest pace since February, according to S&P Global, though prices charged inflation eased to its lowest level since January 2021.
Traders noted that market-moving UK economic data is thin on the ground through Thursday’s session, leaving Sterling exposed to wider market trends and domestic headlines.
GBPUSD
The US dollar softened ahead of an expected Fed rate cut next week. The dollar is down across the board again today and it’s been a tough week so far to start the new month.
Sterling held above $1.3200 yesterday, but it looked vulnerable as the momentum from the recent recovery from around $1.3040 stalled, albeit after marginal new highs in over a month near $1.3275.
Against the euro, the yen and the Swiss franc, the pound advanced to 2-day highs of 0.8767, 206.74 and 1.0654 from early lows of 0.8800, 205.79 and 1.0606, respectively.
Traders now look ahead to the release of payroll processor ADP’s report on US private sector employment later in the day, which could impact the outlook for interest rates ahead of the Federal Reserve’s monetary policy meeting next week.
Reports on U.S. service sector activity, personal income and spending and consumer sentiment may also attract attention in the coming days.
CME Group’s FedWatch Tool is currently indicating an 89.4 percent chance the Fed will cut rates by another quarter point, up from 63.0 percent a month ago.
This Friday brings PCE – the Fed’s preferred inflation measure – and next week delivers the main event: the December rate decision. Traders are pricing a 25-basis-point cut with over 90% conviction, reinforcing dollar softness and giving the euro room to stretch. U.S Dollar Declines on “Potential Fed Chair’ Comment
