Pound sterling improves on a positive preliminary UK S&P Global/CIPS PMI for July.
The pound sterling (GBP) recovered versus its major counterparts in Wednesday’s London session following positive preliminary S&P Global/CIPS Purchasing Managers’ Index (PMI) data for July.
UK Composite PMI outperforms expectations and the previous release.
The Composite PMI came in at 52.7, higher than expectations of 52.6 and the previous report of 52.3, owing to an increase in activity in both the manufacturing and service sectors. The Manufacturing and Services PMI increased to 51.8 and 52.4, respectively, exceeding previous readings.
Chris Williamson, Chief Business Economist, comments on the flash PMI figures. According to S&P Global Market Intelligence, the first post-election business survey paints a positive picture for the new government, with companies operating in manufacturing and services expressing optimism about the future, reporting a renewed surge in demand, and hiring more people. Meanwhile, prices have grown at their slowest pace in three and a half years, boosting the probability of a July rate cut.
Previously, the British pound was underperforming amid mounting anticipation that the Bank of England (BoE) may start decreasing interest rates in August. Market analysts believe the United Kingdom’s (UK) economy is struggling to cope with the BoE’s high interest rates. The effects of a tight monetary policy stance are plainly obvious in households’ spending, as the UK’s Retail Sales In June, a key index of consumer spending that drives inflationary pressures fell quicker than projected.
Meanwhile, BoE officials are reluctant to support rate decreases due to rising service sector inflation. In June, UK service inflation rose consistently by 5.7%.
Daily Market movers: Pound Sterling recovers vs big peers.
During European trading hours on Wednesday, the British pound fell to about 1.2880 against the US dollar. The GBPUSD pair deepens its decline below 1.2900 as risk aversion grows. Meanwhile, the US dollar maintains its rise ahead of a flood of US economic data. The US Dollar Index (DXY). Which measures the value of the US dollar against six major currencies, is hovering around 104.50, a weekly high.
During Wednesday’s session Investors will be watching the preliminary US S&P Global PMI data for July. Which will be released at 13:45 GMT. The report projected to reveal. That the Manufacturing PMI increased at a nominal rate of 51.7, up from 51.6 in June. The Services PMI, a measure of service sector activity, expected to have risen at a slower rate of 54.4 from the previous edition of 55.3. The economic data will show how the economy is doing right now.
This week’s primary triggers for the US Dollar will be the preliminary annualized Q2 Gross Domestic Product (GDP). And Personal Consumption Expenditures Price Index (PCE) data for June, which will be released on Thursday and Friday, respectively. The US economy is expected to to have increased by 1.9% over the previous release of 1.4%.
Investors will be closely watching core PCE inflation, the Federal Reserve’s (Fed) preferred inflation metric, for new clues about when the central bank will begin lowering interest rates. Financial markets currently expect the Fed to begin cutting interest rates in September.
Meanwhile, investors are looking for new developments in the US presidential elections in November. Despite the fact that Democrats have nominated Vice President Kamala Harris as their leader, market experts predict Donald Trump will win the elections.
