GBP USD Exchange Rate Dragged Lower by Risk-Off Mood in Markets
The pound ended the week by extending its losses against the dollar, as things went from bad to worse for the UK currency.
On Friday, the risk-sensitive pound fell to within a whisker of 1.20 amid renewed fears of a global recession – having started the week at 1.23.
This was compounded by data showing growth in the UK manufacturing sector continued to slow in June to a two-year low.
The closely watched S&P Global/CIPS manufacturing purchasing managers’ index (PMI) posted a reading of 52.8 last month, down from 54.6 in May. A score above 50 reflects that the industry is expanding.
Rob Dobson, director at S&P Global Market Intelligence, said: “UK manufacturing output growth ground to a near standstill in June, as intakes of new work contracted for the first time since January 2021. Domestic market conditions became increasingly difficult and foreign demand fell sharply again, stifled by Brexit, transport disruption, the war in Ukraine and a global economic slowdown.”
US factory activity slows sharply
The safe-haven dollar was ready and waiting to shelter risk-sensitive investors from the global economic gloom, sending it higher.
An eagerness by central banks to hike interest rates to tame inflation at the expense of economic growth triggered selloffs of risky assets across markets and lifted safer bets like the US currency.
Speaking earlier in the week, Federal Reserve Chair Jerome Powell suggested that the risk of harm to the economy from higher borrowing costs was less important than restoring price stability – but his comments did little to prevent a risk-off mood in markets.
Activity in the US manufacturing sector continued to decelerate in June as output stalled and new orders contracted, data showed on Friday.
The S&P Global manufacturing PMI retreated to 52.7 last month from 57 in May, indicating that factory activity grew at its slowest pace in almost two years. Economists expected the PMI to come in at 52.
The data suggest that the manufacturing industry is restricting economic growth – a concerning trend that’s likely to intensify through the summer, said Chris Williamson, chief business economist at S&P Global.
“Forward-looking indicators such as business expectations, new order inflows, backlogs of work and purchasing of inputs have all deteriorated markedly to suggest an increased risk of an industrial downturn,”
Looking ahead
US markets will be closed on Monday for the Independence Day holiday, while the UK calendar has nothing pencilled in until Tuesday.
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The post GBP USD Exchange Rate Dragged Lower by Risk-Off Mood in Markets appeared first on Pound Sterling Forecast.
Source: https://www.poundsterlingforecast.com/2022/07/gbp-usd-exchange-rate-dragged-lower-by-risk-off-mood-in-markets/
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