GBP/USD: Pound Advances vs Weaker Dollar Ahead Of Data & On Election Speculation

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The pound advanced versus the US dollar in the previous session. The pound US dollar exchange rate dropped to a low of US$1.2896 before rebounding to close 0.2% higher at US$1.2940. This was more of a dollar weakness story rather than any notable pound strength. The pair has jumped in early trade om Tuesday.

The pound pushed higher in the previous session despite a narrowing of the Conservative party’s lead in the polls ahead of the December 12th elections and despite weaker than expected manufacturing data.

The IHS Markit/ Cips manufacturing purchasing managers index showed that the sector contracted again in November, registering 48.9 in November, down from 49.6 in the previous month. This is the seventh straight month that the manufacturing pmi has been suck below 50 – a level that separates expansion from contraction. Employment for the sector fell for the eighth consecutive month and the rat at which employees were being laid off was the steepest in over 7 years s manufacturers scramble to cut costs. Usually weak data would hit demand for the pound and drag the value lower.

Today investors will continue to watch the polls in an attempt to gauge whether the Conservatives can hold onto their lead and secure an overall majority in Parliament. UK construction pmi data will also be in focus. Investors will look to see whether the construction sector remains deep in contraction or whether there are signs of improvement ahead of Brexit.

Tariff Man Trump At It Again

The US dollar dropped sharply in the previous session following the release of the ISM manufacturing pmi. The key manufacturing index registered 48.1 in November, down from 48.3 in October and well below the 49.4 analysts expected. The level 50 separates expansion from contraction. This was the fourth straight month that the manufacturing sector remained in contraction. The data raised fears over the state of the US economy, sending the dollar lower.

Trade tensions will remain in focus today after President Trump tweeted yesterday that the US will apply tariffs to base metals arriving from Argentina and Brazil. The Trump administration also threatened the EU with tariffs in Airbus – Boeing battle. The prospect on trade wars on so many fronts unnerved dollar traders sending the greenback lower.

What do these figures mean?
When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.

For example, it could be written:

1 GBP = 1.28934 USD

Here, £1 is equivalent to approximately $1.29. This specifically measures the pound’s worth against the dollar. If the US dollar amount increases in this pairing, it’s positive for the pound.

Or, if you were looking at it the other way around:

1 USD = 0.77786 GBP

In this example, $1 is equivalent to approximately £0.78. This measures the US dollar’s worth versus the British pound. If the sterling number gets larger, it’s good news for the dollar.

 


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