UK Data Reinforces Pound Sterling Confidence: Pound to Dollar Rate Rebounds

July 25, 2024 - Written by Frank Davies

STORY LINK UK Data Reinforces Pound Sterling Confidence: Pound to Dollar Rate Rebounds

Equity markets were the main focus on Wednesday with sharp losses on Wall Street and mixed US data.

Despite weaker risk conditions, the dollar failed to gain significant benefit with USD/JPY sliding to 2-month lows.

The Pound to Dollar (GBP/USD) exchange rate initially dipped to 10-day lows at 1.2875 before a recovery to 1.2930 as the dollar retreated.

According to Scotiabank; “Intraday trading patterns are turning more positive and suggest the squeeze higher in Cable may extend. Gains above 1.2940 would lift the GBP back towards 1.30.”

Equity-market losses were led by the US and Euro area after the latest earnings data.

Steve Clayton, head of equity funds, Hargreaves Lansdown commented; "The interim results season is kicking off on both sides of the Atlantic and, so far, investors are underwhelmed by what they have seen."

A slide in US tech mega stocks would undermine the case for US exceptionalism and hurt the dollar.

The FTSE 100 index did retreat, but was broadly resilient which helped support the Pound.

The UK PMI manufacturing index improved to a 24-month high of 51.8 for July from 50.9 previously and above consensus forecasts of 51.0.

The services-sector index edged higher to a 2-month high of 52.4 from 52.1 and in line with market expectations.

Business confidence rebounded to near 2-year highs while new business strengthened at the strongest rate for 15 months.

Although there was the slowest overall increase in services prices since February 2021, there was a stronger increase in manufacturing prices.

According to Scotiabank; “The data suggest steady, if uninspiring, growth momentum and leaves the debate over the near-term BoE policy outlook unresolved.”

The US PMI manufacturing dipped to a 7-month low of 49.5 for July from 51.6 and below consensus forecasts of 51.7.

In contrast, the services-sector index strengthened to a 28-month high of 56.0 from 55.3 and above market expectations of 54.7.

Employment increased at a slower rate on the month while business confidence also retreated for the second successive month and to below the long-term average.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence commented; “The rate of increase of average prices charged for goods and services has meanwhile slowed further, dropping to a level consistent with the Fed’s 2% target.”

He did, however, express some caution; “In terms of inflation, the July survey saw input costs rise at an increased rate, linked to rising raw material, shipping and labour costs. These higher costs could feed through to higher selling prices if sustained.”

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TAGS: Pound Dollar Forecasts