Pound US Dollar Exchange Rate Edges Higher following UK PMI data

November 6, 2024 - Written by John Cameron

STORY LINK Pound US Dollar Exchange Rate Edges Higher following UK PMI data

The Pound US Dollar exchange rate gained ground on Tuesday following the publication of the UK’s latest PMI data.

At the time of writing, GBP/USD was trading at approximately $1.2985, up roughly 0.2% from the start of Tuesday’s session.

The Pound (GBP) rose against most currencies on Tuesday, bolstered by a better-than-expected domestic PMI report in the morning.

The final October index slipped from 52.4 to 52, but outperformed the more cautious prediction of 51.8, thereby instilling confidence in the Pound.

However, the key services sector continued to struggle, which curbed the Pound's progress, keeping its gains relatively modest.

The US Dollar (USD) pulled back against most currencies on Tuesday, burdened by growing uncertainty as the US general election approached.

With Americans heading to the polls, market volatility increased which saw USD investors adopt a cautious strategy, refraining from significant activity until after the election results.

Erik Knutzen and Jeff Blazek, co-CIOs of Multi-Asset Strategies at Neuberger Berman, commented on the market’s mood on Tuesday, and said:

‘Uncertainty around control of Congress, particularly the House, could also extend longer than uncertainty over who is in the White House. And a contested result could add still more days or weeks of market volatility. We have been anticipating a
pick-up in volatility as the election nears, and this week is likely to see a peak in that volatility, lasting until we have an unambiguous outcome.’

Beyond the US general election results, the main driver for the Pound US Dollar exchange rate this week is anticipated to be the interest rate decisions from both the Bank of England (BoE) and the Federal Reserve, scheduled for Thursday.

Both central banks are broadly expected to implement a 25-basis point interest rate cut, bringing their respective rates down from 5% to 4.75%.

However, market chatter suggesting that the Fed might opt for a more substantial 50-basis point cut could put pressure on the US Dollar leading up to the decision.

Regarding the Pound, with a 25-bps cut largely priced in by markets, GBP investors will be scrutinizing the central bank's forward guidance for any indications about the future trajectory of UK monetary policy. Any dovish signals could potentially
weaken Sterling's position towards the latter stages of the week.

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TAGS: Pound Dollar Forecasts