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GBP/USD Nosedives as Abysmal PMIs Prompt UK Growth Fears

Last week’s high: $1.2704

Last week’s low: $1.2542

US Dollar Sinks on Fed Rate Cut Expectations

The Pound US Dollar exchange rate slumped last week, with Sterling’s losses being kicked off by the release of some gloomy PMI figures.

This saw an extremely narrow expansion in the dominant service sector unable to offset slumps in the Manufacturing and Construction sectors in June, resulting in the UK’s private sector suffering its first contraction in three years.

Meanwhile the US Dollar was lifted at the start of the week by some robust manufacturing figures as well as a rise in safe-haven demand after the US threated to impose tariffs on the EU due to a row over Airbus subsidiaries.

The end of the week was then closed out by the publication of the US non-farm payrolls report, with a stronger-than-expected rebound in employment helping to give the US Dollar a final boost over the finishing line.

USD Outlook: Rebound in in UK GDP to Boost Sterling?

Looking to the week ahead, we may see the GBP/USD exchange rate rally this week, following the publication of the UK’s latest GDP figures.

These are expected to show that domestic growth bounced back in May following a sizable decline in April, although with the rebound expected to be fairly modest, any upswing in the Pound is likely to prove limited.

Meanwhile, the release of the latest US CPI figures could cast the US Dollar lower this week if inflation continued to slow in June as expected, with it putting more pressure on the Federal Reserve to pursue a policy of aggressive rate cuts this year.

Key Events

9th Jul

15:00 US JOLTs Job Openings (May)

10th Jul

09:30 UK Trade Balance (May)

09:30 UK GDP (May)

09:30 UK Industrial Production (May)

19:00 US FOMC Minutes

11th Jul

10:30 UK BoE Financial Stability Report

13:30 US Inflation Rate (Jun)

12th Jul

13:30 US PPI (Jun)

 

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Alastair Archbold
Currency Trader
T: 01442 892 062

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