- Pound (GBP) adds to yesterday’s gains with PMI data from both sides in focus
- UK service sector & manufacturing expected to show improvement but remain in contraction
- US Dollar (USD) is treading water after the White House walks back on Navarro’s “China trade deal is over” comment
- Pound US Dollar exchange rate (GBP/USD) traded a wide range overnight US$1.2436 – US$1.2507
The Pound is extending gains on Tuesday after storming higher in the previous session. The Pound US Dollar exchange rate rallied 1% versus the US Dollar on Monday, snapping a four day losing streak, settling at US$1.2469.
At 06:15 UTC, GBP/USD is trading +0.1%at US$1.2475 as investors look ahead to PMI data for further clues as to how the economic recovery is progressing.
UK service sector and manufacturing PMI data is expected to show an improvement in activity in June as lockdown measures ease. However, the data is also expected to show that the sectors remain firmly below the 50 level which separates expansion from contraction. The manufacturing sector is expected to have performed slightly better, with analysts forecasting 45 on the index, up from 40.7. The level 50 separates expansion from contraction.
The service sector which has borne the brunt of the lockdown impact is expected to increase to 39.5, up from 29 in May.
The data comes as UK coronavirus deaths dropped to just 15 on Monday, a level last seen early March, pre-lockdown. Today Prime Minister Boris Johnson is also expected to lay out changes to the social distancing rules whilst also opening up more of the economy.
The US Dollar is trading steadily on Tuesday after US policy makers, including President Trump flashed mixed signals concerning trade talks with China. On the one hand a move by the US to restrict 4 more Chinese organisations as “foreign missions” weighed on demand. Trump’s trade advisor also claimed that China deal was over, only for President Trump to swiftly contradict him confirming that it was still “fully intact”.
Investors will now look ahead to June monthly PMI releases. Like the UK, the US is expected to show a steady recovery. Both the service sector and the manufacturing sector are forecast in the mid to late 40’s, meaning they remain in contraction, but moving closer to expansion at 50.
