GBP/USD pares losses on poor US data
Wednesday 24 August, 2022
Daily Currency UpdateThe UK’s PMIs were a mixed bag yesterday. The manufacturing sector fell to 46, into contractual territory, driven by slower demand in July. The survey also appears to suggest that input prices (materials, labour, and other overheads) are cooling. Whereas, the services sector beat expectations, in expansion at 52.5 for July. It showed that hiring demand is still strong and the difficulty in finding staff remains, all of which points to sustained upside wage pressure. These indicate that core inflationary pressures may have peaked but there are of course other indicators that suggest inflation may be more persistent still. With the hope that inflation could be peaking GBPEUR picked up from the low of 1.1830 and reached 1.1881.
Key MoversPoor US data yesterday which included Flash services PMI, Flash Manufacturing, and Richmond Manufacturing Index all missed expectations, which all contributed to a pull back in the US dollar rally. GBP/USD saw a move from a 1.1727 low up to 1.1850 at the end of the UK session.
Overnight though comments from Minneapolis Fed President, Neel Kashkari, fuelled a further USD rally. Kashkari mentioned that the biggest fear is that we are misreading underlying inflation dynamics. The policymaker also added that the US Federal Reserve can relax on interest rate hikes when compelling evidence of CPI heading toward 2% is seen. On the data front today there will be some focus on durable goods orders.
Europe’s PMIs yesterday all but confirmed the market’s fears about the damaging combination of high energy prices and slowing global demand.
- GBP/USD: 1.1745 - 1.1880 ▲
- GBP/EUR: 1.1815 - 1.1925 ▲
- GBP/AUD: 1.7045 - 1.7220 ▲
- EUR/USD: 0.9900 - 1.0050 ▲