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GBP/USD exchange: Rate rises despite services PMI slump


Much to the disappointment of GBP traders, the services PMI has fallen from 53.9 points to 52.2, instead of printing at 53.3 points as forecast.

Commenting on the data, IHS Markit Chief Business Economist Chris Williamson said: “The disappointing numbers bring mounting evidence that Brexit worries are taking an increasing toll on the economy. 

“Combined with the manufacturing and construction surveys, the … [services PMI is] setting the scene for GDP growth to weaken sharply in the fourth quarter.”

Pound Sterling has remained in demand despite the news, thanks in part to reports of a UK-wide customs union deal being planned.

Although these suggestions have been dismissed by Downing Street officials, the pound’s recent rise demonstrates how eager GBP traders are for news of an orderly departure from the EU.

On the other side of the pairing, the US dollar has fallen against the pound ahead of tomorrow’s US midterm elections.

Seen by many as a test of faith in President Donald Trump’s leadership, the midterm elections could potentially see the Democrats take a majority in the House of Representatives and the Senate.

While some analysts see this as an unlikely outcome, such a development would effectively restrict what policies Mr Trump is able to pass for the remainder of his tenure.

With this in mind, the midterms result could cause significant USD/GBP exchange rate volatility by Wednesday depending on which side comes out on top.

Making the case for the Republicans, Mr Trump said: “This election will decide whether we build on the extraordinary prosperity that we have achieved or whether we let the radical Democrats take control of Congress and take a giant wrecking ball to our economy and to the future of our nation.”

In response, former President Barack Obama said: “On Tuesday you can vote for a politics that’s decent, for a politics that`s honest, for a politics that is lawful, for a politics that tries to do right by people.”

Before the midterm elections, the US dollar could be influenced by this afternoon’s non-manufacturing PMI.

Covering US economic activity in October, the reading is tipped to decline slightly from 61.6 points to 59.3.

While this would still indicate growth, such a decline could rattle USD traders ahead of the election and may cause greater losses against the pound.



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