Pound US dollar exchange rate: GBP steady as UK service sector better than expected
GETTY The pound US dollar exchange rate is currently trading at around $1.322
The pound’s resilience against the US dollar this morning can be put down to a better-than-expected service sector survey from the UK. According to data published by IHS Markit, the UK’s services PMI jumped from 54.0 to 55.1 in June, sailing past expectations activity would stall, and expanding at its fastest pace since October. The data attributes the uptick in activity to increased demand for business and financial services as well as the sunny weather and World Cup fever helping to bolster consumer spending. Along with the other PMI readings from earlier in the week, this points to the UK economy having expanded at a much healthier pace in the second quarter.
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The latest UK services PMI has beaten expectations ING economist James Smith
This saw the pound tick higher as analysts speculated the rebound in growth greatly increases the possibility of the Bank of England (BoE) targeting a rate hike in August. ING economist James Smith said: “The latest UK services PMI has beaten expectations. “At 55.1, it now stands at the highest level since October. “This, much like the recent data emerging from the retail sector, suggests that the economy is having a better ride in the second quarter than in the first - and for the Bank of England, this will be put a fairly big tick in the August rate hike box.”
Meanwhile the US dollar’s losses were limited this morning, with currency traders reluctant to make any major moves as investors wait for more clarity on how US-China trade tensions may be impacted by the tariffs set to be implemented by both countries on Friday. Further limiting movement in the USD exchange rate today is the closure of domestic markets for the Independence Day holiday across the US. Looking ahead, the GBP/USD exchange rate could come under heavy pressure on Thursday as ISM publishes the latest US non-manufacturing PMI. We could see the US dollar rocket should the US services sector have mirrored the manufacturing sector in enjoying another upswing in activity. Meanwhile movement in the pound is likely to be driven by a speech from Mark Carney on Thursday, with the BoE Governor possibly lending support to Sterling should he indicate the bank is on track for a rate hike later this summer.