Pound Sterling gains as investors digest downbeat UK PMI
|- The Pound Sterling bounces back in the aftermath of the preliminary UK S&P Global PMI, which came in lower than expected.
- Traders expect the BoE to deliver one more interest rate cut this year.
- The US Dollar bounces back after a mixed flash US PMI report.
The Pound Sterling (GBP) recovers intraday losses in Monday's NorthArm as investors digest weaker-than-expected preliminary United Kingdom (UK) S&P Global Purchasing Managers’ Index (PMI) data for September.
The UK Composite PMI came in at 52.9, down from 53.8 in August, suggesting that economic activity in the UK expanded at a slower pace. The indexes for both the manufacturing and the service sectors declined more than expected.
Still, the impact of the slower growth suggested by the PMI data is expected to remain limited considering comments from Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, who appears to be upbeat on the overall economic outlook.
"A slight cooling of output growth across manufacturing and services in September should not be seen as too concerning, as the survey data are still consistent with the economy growing at a rate approaching 0.3% in the third quarter, which is in line with the Bank of England’s forecast," Williamson said.
Going forward, the Pound Sterling's valuation will be guided by market expectations over the Bank of England (BoE) interest-rate outlook. Traders expect the BoE to cut only once in the remaining two monetary policy meetings this year. The BoE kept its key borrowing rates unchanged at 5% last Thursday, with an 8-1 vote split, after cutting them by 25 basis points (bps) in August.
British Pound PRICE Today
The table below shows the percentage change of the British Pound (GBP) against listed major currencies today. The British Pound was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.40% | -0.06% | 0.25% | -0.30% | -0.48% | -0.42% | 0.08% | |
| EUR | -0.40% | -0.50% | -0.13% | -0.69% | -0.93% | -0.80% | -0.32% | |
| GBP | 0.06% | 0.50% | 0.44% | -0.19% | -0.42% | -0.30% | 0.18% | |
| JPY | -0.25% | 0.13% | -0.44% | -0.55% | -0.81% | -0.65% | -0.27% | |
| CAD | 0.30% | 0.69% | 0.19% | 0.55% | -0.13% | -0.11% | 0.37% | |
| AUD | 0.48% | 0.93% | 0.42% | 0.81% | 0.13% | 0.14% | 0.61% | |
| NZD | 0.42% | 0.80% | 0.30% | 0.65% | 0.11% | -0.14% | 0.48% | |
| CHF | -0.08% | 0.32% | -0.18% | 0.27% | -0.37% | -0.61% | -0.48% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Daily digest market movers: Pound Sterling recovers its intraday losses against US Dollar
- The Pound Sterling extends the intraday recovery to near 1.3340 against the US Dollar (USD) in Monday’s North American session. The GBP/USD pair rebounds despite a slightly recovery in the US Dollar as the US Dollar Index (DXY), which tracks the Greenback’s value against its major peers, rises to near 101.00.
- The US Dollar moves higher as the release of the mixed United States (US) preliminary S&P Global Purchasing Managers’ Index (PMI) data for September. The report showed that Composite PMI edges lower to 54.4 from 54.6 in August. Further deterioration in the Manufacturing PMI was offset the better-than-forecasted activities in the services sector.
- Going forward, market expectations for the Federal Reserve (Fed) will drive the US Dollar. Financial markets expect the Fed opting for a 50-bps interest rate cut for the second straight time increase as policymakers continue to remain concerned over the labor market outlook. The CME FedWatch tool shows that the probability of the Fed reducing interest rates by 50 bps to 4.25%-4.50% in November is close to 50%.
- On Friday, comments from Fed Governor Christopher Waller indicated that there will be more rate cuts if labor market conditions worsen.
Technical Analysis: Pound Sterling climbs above 1.3300
The Pound Sterling bounces back above 1.3300 against the US Dollar in North American trading hours. However, the near-term outlook of the GBP/USD pair remains firm as it holds above the 20-day Exponential Moving Average (EMA) near 1.3150. Earlier, the Cable strengthened after recovering from a corrective move to near the trendline plotted from the December 28, 2023, high of 1.2828, from where it delivered a sharp increase after a breakout on August 21.
The 14-day Relative Strength Index (RSI) falls slightly but remains above 60.00, suggesting an active bullish momentum.
Looking up, the Cable will face resistance near the psychological level of 1.3500. On the downside, the psychological level of 1.3000 emerges as crucial support.
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