Oct 24, 2022
VOT Research Desk
As PMI surveys show an economic slowdown, the value of the pound declines.
Following a positive gap opening and a rise above 1.1400 on Monday during Asian trading hours, GBP/USD has lost momentum and is now heading around 1.1300.
The British pound finds it difficult to gain momentum in the wake of the UK’s poor PMI data, and the gloomy market sentiment raises the possibility that the dollar will continue to outperform its competitors.
Boris Johnson made the decision to withdraw from the contest for the conservative leadership over the weekend.
Rishi Sunak now has a sizable lead over Penny Mordaunt, who is not anticipated to gain enough support to challenge Sunak by Monday’s deadline, and is largely predicted to succeed Liz Truss.
Even while this event could have a short-term favorable effect on the pound, investors will probably hold off on placing risky bets as they wait to see how Sunak will handle the budget.
The private sector’s business activity shrank at an increasing rate in the first half of October, according to the S&P Global/CIPS Composite PMI for the UK, which fell to 47.2 in October from 49.1 in September. At 47.5, the Services PMI fell to its lowest level in 21 months.
According to Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, who reviewed the data, the increased political and economic uncertainty has caused business activity to fall at a rate not seen since the global financial crisis in 2009 if pandemic lockdown months are excluded.
The UK is in recession as a result of GDP being certain to decline in the fourth quarter following a possible third-quarter decrease.
Participants in the market will closely monitor Wall Street in the afternoon. Major US market indexes, despite Friday’s remarkable recovery, are still expected to begin in the red, with futures indices falling between 0.5% and 0.6%.
In the second half of the day, safe-haven flows are most likely to support the dollar, unless
