GBP to USD Exchange Rate Plunges thanks to Risk-Off Flows

October 2, 2024 - Written by John Cameron

STORY LINK GBP to USD Exchange Rate Plunges thanks to Risk-Off Flows

The Pound US Dollar exchange tanked on Tuesday as a cautious market mood severely undermined the currency pairing.

At the time of writing, GBP/USD was trading at approximately $1.3275 down roughly 0.7% from the start of Tuesday’s session.

The US Dollar (USD) climbed against the majority of its peers on Tuesday, buoyed by a risk-off mood.

As investors opted for safer assets, the ‘safe-haven’ greenback was lifted against its riskier counterparts.

Offering further support to USD exchange rates on Tuesday was the publication of the US’s latest Job Openings and Labor Turnover survey (JOLTs), which came in above forecast and confirmed a resumption in domestic job growth.

However, potentially capping any further USD gains was the US’s latest ISM manufacturing PMI, which confirmed another monthly contraction within the sector.

The Pound (GBP) ticked lower against most other currencies on Tuesday following the release of the UK's latest manufacturing PMI.

September’s finalised index met market expectations, but slipped from 52.5 to 51.5, coming in at the lowest point since March 2020, with the slowdown primarily linked to anxieties surrounding the UK's upcoming Autumn Budget.

However, despite the decline, the index remained above the 50 mark, signalling continued expansion and potentially limiting further losses for GBP.

Rob Dobson, Director at S&P Global Market Intelligence commented:

‘The UK manufacturing sector is still expanding at a solid, albeit slightly slower, pace. However, manufacturers have become more nervous about the outlook, suggesting that the current spell of impressive growth is fading.
The extent of the drop in confidence was striking, beaten only by that seen in March 2020 prior to COVID lockdowns. Uncertainty about the direction of government policy ahead of the coming Autumn Budget was a clear cause of the loss of confidence, especially given recent gloomy messaging.’

Looking forward to Wednesday, the main driver for the Pound US Dollar exchange rate will likely be the market's appetite for risk, given the absence of other influencing factors.

If the current risk-averse sentiment persists, GBP/USD may continue to struggle.

Equally, if markets shift back to a more optimistic trading environment, the currency pair could strengthen.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Dollar Forecasts