Pound US Dollar Exchange Rate Muted

The Pound US Dollar (GBP/USD) exchange rate was range bound on Tuesday afternoon as US investors digested key data.

At the time of writing, GBP/USD was trading at around $1.1456, which was roughly the same as Tuesday’s opening rate.

US Dollar (USD) Exchange Rates Rebound amid Wave of Positive Data

The US Dollar (USD) began to recover on Tuesday afternoon as job centric and manufacturing data lifted the ‘Greenback’.

This reversed the majority of it the ‘Greenback’s losses from earlier in the European session.

In September job openings rose from 10.28M to 10.717M, beating forecasts of a drop to 10M. The job openings remain close to a record high, signaling that the US jobs economy is strong as businesses look for new employees.

The manufacturing PMI also aided the US Dollar’s recovery, the figures were revised higher from 49.9 to 50.4 in October. However, according to economists this uptick was caused by a backlog of work. This knowledge limited USD’s upside.

Commenting on the data, Siân Jones, Senior Economist at S&P Global Market Intelligence said:

‘October PMI data signaled a subdued start to the final quarter of 2022… As such, efforts to clear backlogs of work, rather than new order inflows, drove the latest upturn in production.’

Pound (GBP) Exchange Rates Mixed in Wake of Manufacturing PMI

The Pound was trading in a broad range on Tuesday in response to the finalized manufacturing PMI figures for October.

The final reading saw the index revised higher to 46.2, beating last week’s flash reading of 45.8. this caused a mixed response from investors. While the figures came in better than expected, thus giving GBP a boost, many investors were aware that the manufacturing sector was still in contraction.

John Glen, Chief Economist at the Chartered Institute of Procurement & Supply remarked that there was still a glimmer of hope regarding the figures:

‘The inflationary clouds that have been building over the UK manufacturing industry have finally burst, with a dramatic fall in demand creating the sharpest reduction of new orders since May 2020. But there is a glimmer of hope that increasingly robust global supply chains could be key to halting rising prices.’

Also reducing Sterling’s losses on Tuesday was rate hike bets. Investors have priced in a 75bps hike at the Bank of England (BoE) next monetary policy meeting.

GBP/USD Exchange Rate Forecast: Currencies to be Driven by Interest Rate Bets?

Looking ahead the Pound US Dollar exchange rate could drop on Wednesday as the Federal Reserve announces their latest interest rate decision.

Investors are expecting the Fed to enact their fourth consecutive 75bps hike during Wednesday’s policy meeting. If true, USD could see an uptick. However, the Fed could adopt a more dovish outlook for future interest rate hikes. Leading the US Dollar to weaken.

A lack of UK data on Wednesday will see GBP investors focusing on the BoE’s interest rate decision on Thursday. Uncertainty over the UK government’s fiscal plans could complicate the BoE’s decision. If the bank errs on the side of cautious and opts for a smaller-than-expected hike the Pound could weaken.