Sterling slips as debt ceiling deadlock continues
Tuesday 23 May, 2023
Daily Currency UpdateGBP/USD has fallen towards 1.24 this morning as risk aversion starts to envelop markets as talks in the US to raise the debt ceiling rumble on. Yesterday saw President, Joe Biden and Republican House Speaker, Kevin McCarthy has a "productive" discussion about raising the government’s borrowing limit however no agreement has yet been made which has led to stock market losses and the safe haven US dollar being sought. Not helping the pounds cause was this morning’s latest UK Public Sector Net Borrowing data for April which showed the Treasury had to borrow £24.7bn substantially higher than the forecast £17.5bn. Later this morning we have PMI data released which is expected to show the manufacturing sector continuing to shrink with the services sector continue to expand. The latter will be of particular interest and could move the pound given the UK economy is primarily made up of businesses in this sector. GBP/USD currently trades at 1.2415 with GBP/EUR around 1.15.
Key MoversThis morning's eye-catching data release has been a woeful German Manufacturing PMI which has come in at 42.9, its worst reading since May 2020 when the world was still in pandemic driven turmoil. The report put together by S&P Global included comment from Dr Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank who said that "In the manufacturing sector, the most striking thing is the significant drop in new orders, and specifically in foreign demand, which has virtually collapsed." High inflation and a stuttering China recovery are likely hitting the sector hard and should the positive service numbers start to fall then that could cause a headwind for the euro. Later today we get PMI readings from the States however it is debt ceiling talks that will be the markets primary focus until a resolution is hopefully found in the next couple of weeks. EUR/USD has slipped under 1.08 this morning on the aforementioned broad dollar strength.
- GBP/USD: 1.2340 - 1.2505 ▼
- GBP/EUR: 1.1430 - 1.1545 ▼
- GBP/AUD: 1.8640 - 1.8805 ▲
- EUR/USD: 1.0760 - 1.0870 ▼