industry

Pound US dollar exchange rate: GBP on the defensive despite service sector growth upswing


The pound is trending lower against the US dollar this morning as an uptick in activity in the UK’s all-important service sector failed to inspire Sterling sentiment.

According to data published by IHS Markit, activity in the UK’s service sector accelerated last month, with the index climbing from 53.5 to 54.3, beating forecasts of a more modest rise to 53.9.

The stronger-than-expected growth appears to have helped offset the lacklustre performance of the manufacturing and construction sectors and puts the UK on track for a robust 0.4 per cent growth in the third quarter.

However this was not enough to pull the pound out of the doldrums this morning as the survey also revealed an increasingly gloomy outlook from firms, with business optimism striking a new five-month low as Brexit-related uncertainty continues to hound sentiment.

Chris Williamson, Chief Business Economist at IHS Markit, said: “Business expectations for the year ahead meanwhile sank markedly lower, down across all three sectors to one of the lowest levels seen since the EU referendum, largely reflecting increased anxiety over Brexit negotiations.”

Meanwhile the US dollar remains in demand this morning as global trade uncertainty continues to spook investors, spurring them to flock to the safe haven currency.

The latest wave of anxiety comes in the wake of some disappointing Chinese data, which revealed business growth slowed to a five-month low in August, perhaps a reflection that China’s trade dispute with the US is beginning to bite.

However Beijing still shows no signs of backing down despite the threat of further tariffs, something which appears to indicate that the two sides are headed towards a full-blown trade war, which would likely continue to buoy the US dollar.

Looking forward, the release of the latest US trade figures this afternoon could prompt some further movement in the pound US dollar exchange rate today.

We could see the US dollar pull back as economists forecast that July will have brought a sizeable rise in the US trade deficit, despite the introduction of President Trump’s tariffs.

Meanwhile a lull in UK data in the latter half of this week could see the pound struggle to regain its footing, especially if Brexit uncertainty continues to mount.



READ SOURCE

Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.