Pound Sterling recovers, but Declining UK Inflation keeps its broader appeal modest.
In Tuesday’s late London session, the Pound Sterling (GBP) found support near a six week low around 1.2540, following an Encouraging Manufacturing PMI report from S&P Global/CIPS for March. The UK Manufacturing PMI returns to Expansion, rising above the 50.0 barrier that separates Expansion from Contraction to 50.3, above Expectations and the previous reading of 49.9.
Rob Dobson, Director of S&P Global Market Intelligence, stated: “The end of the first quarter saw UK Manufacturing recover from its recent Doldrums. Following a yearlong dip, Production and new orders began to recover, albeit slowly, with greater Domestic demand driving the Expansion.
The GBPUSD pair continues to have little appeal, owing Primarily to Sluggish market sentiment. The Cable’s near term Prognosis is negative, as traders push back Expectations for the Federal Reserve’s (Fed) first rate decrease, which is due in June after maintaining rates higher for more than two years. The likelihood of rising interest rates for a longer period of time strengthens the US Dollar while weakening the pair.
UK shop price inflation increased by 1.3%, the weakest pace since December 2021.
The sustained recovery in the United States industrial sector, which has a positive economic outlook, prompted traders to reduce their expectations on rate reduction by June. . Higher demand for the US manufacturing sector suggests strong household spending, allowing Fed policymakers to avoid rushing to decrease interest rates. Upbeat economic expectations give the Fed plenty of time to gather additional inflation data before making any rate decreases.
The US Dollar Index (DXY) rises to a new four-month high slightly above 105.00, fueled by a buoyant safe-haven bid and positive economic forecasts in the US. More uncertainty is expected in global markets as the US Bureau of Labor Statistics (BLS) releases the Nonfarm Payrolls (NFP) statistics for March on Friday. But first, investors will look at the February US JOLTS Job Openings data, which will be released at 14:00 GMT.
Daily Market movers: Pound Sterling finds strength following UK factory statistics.
Due to several Headwinds, the pound Sterling appears fragile near its more than six week low of 1.2540. Slowing UK Inflation and a gloomy market attitude have impacted severely on the Pound Sterling.
The British Retail Consortium (BRC) stated on Tuesday that UK shop price inflation increased by 1.3% in March, the slowest pace in more than two years. This represents a slowdown from the 2.5% gain witnessed in February. Shop price inflation decreased due to lower pricing for both food and non-food items. Non-food costs increased by only 0.2% from 1.3% the previous month, while food prices increased by 3.7%, down from 5.0%.
BRC Chief Executive Helen Dickinson stated that tight rivalry among retailers to reduce prices for their customers has alleviated business Price inflation has reached its lowest level since December 2021. However, she cautioned that rising costs could jeopardize progress in lowering inflation.
Lower retail price inflation could provide respite to Bank of England policymakers, allowing them to reduce interest rates after holding them high for more than two years. Currently, the market expects the BoE to begin lowering interest rates after the June meeting.
Market mood has weakened as traders reduce their expectations for the Federal Reserve to drop interest rates in June.
Meanwhile, market mood has weakened as traders reduce their expectations for the Federal Reserve to drop interest rates in June. The likelihood of a Fed rate cut that month diminished after the United States Institute of Supply Management (ISM) announced stronger-than-expected Manufacturing PMI data for March. The Manufacturing PMI went over After 16 months of contraction, the threshold of 50.0 was reached for the first time. The US factory sector appears to be recovering from the high interest rate environment that has weighed on output over the last year and a half.
