GBP/USD – Soft UK PMI Drags Down Pound

GBP/USD has posted strong losses on Friday, as the pair trades in the low-1.68 range in the North American session. The pound has lost about 150 points this week as it trades at six-week lows against the US dollar. In economic news, British Manufacturing PMI slipped to 55.4 points, marking a four-month low. It's a busy day in the US, highlighted by three key events - Nonfarm Employment Change, Unemployment Rate and ISM Manufacturing PMI. We'll also get a look at consumer confidence levels, with the release of UoM Consumer Sentiment.

British PMIs are closely tracked by analysts, as they are important gauges of the health of key sectors in the British economy. The Manufacturing PMI softened in March, dropping to 55.4 points, short of the estimate of 57.2 points. This was the indicator's lowest level since March. The weak reading follows disappointing housing inflation data. Nationwide HPI posted a gain of just 0.1%, its weakest performance in over a year. The markets had forecast a healthy gain of 0.6%.

On Thursday, Unemployment Claims came in at 302 thousand, higher than the previous release but very close to the estimate of 303 thousand. Earlier in the week, ADP Nonfarm Payrolls posted a sharp drop. If the official NFP release follows suit and misses the estimate of 234 thousand, the US dollar could give up some if its recent gains. Meanwhile, US GDP exceeded expectations in the second quarter, as the economy expanded at an annual rate of 4.0%. This easily beat the estimate of 3.1% and marked the strongest quarter of economic growth since Q4 of 2009. The boost in economic activity was helped by strong consumer confidence and business investment, as well as solid employment data. The US dollar took advantage of the strong numbers, posting gains against the pound and other major currencies.

The Federal Reserve released a policy statement on Wednesday, with the Fed sounding somewhat dovish in tone. Policymakers acknowledged lower unemployment levels, but noted that "there remains significant underutilization of labor resources" in the economy. The Fed statement reinforces the view that the US central bank is in no rush to raise interest rates after the termination of QE, which is expected in October. As well, the Fed said that inflation levels have moved somewhat closer to the Fed's target of 2.0%.

GBP/USD 1.6839 H: 1.6891 L: 1.6822