The Pound Sterling has appreciated approximately 0.26% against the US Dollar on Friday, coinciding with the US government entering its third day of shutdown and foregoing the release of Nonfarm Payroll figures for September. The Purchasing Managers Index, along with data from S&P Global and ISM in the US, serves as the primary catalysts for price movements. GBP/USD is currently trading at 1.3471, having recovered from daily lows of 1.3427.
The US ISM Services PMI has dropped to a neutral 50, indicating a decline in business activity and a contractionary employment environment. Fed’s Miran and Goolsbee emphasize the importance of data reliance as the shutdown interrupts the NFP release, creating challenges for policy direction. The UK Services PMI has decreased to a five-month low; however, the Bank of England is anticipated to maintain interest rates, while the Federal Reserve is considering a 25 basis points cut.
> GBP/USD rises as services PMIs indicate signs of a slowdown, while the divergence between the Fed and BoE supports Sterling’s strength : The ISM Services PMI indicates a decline in business activity in the US. The Index decreased from 52 to 50, remaining at its neutral level, signaling a potential economic slowdown. Economists projected a slowdown to 51.7. S&P Global Services PMI surpassed expectations of 53.9, increasing to 54.2 in September. Observations from the ISM release suggest: “Commentary in general indicated moderate or weak growth, with more isolated observations of supplier delivery challenges.” Employment remains in a state of contraction, attributed to a mix of postponed hiring initiatives and challenges in locating qualified personnel. Federal Reserve Governor Stephen Miran emphasized the significance of data accessibility for Fed officials. He stated that inflation expectations remain well anchored, indicated that the real neutral rate is approximately 0.5%, and noted that he has not been considered for the leading position at the Fed.
Concurrently, Austan Goolsbee remarked that the employment metrics from the Chicago Fed suggest an unemployment rate of 4.3%. He noted that while the market anticipates cuts, the Fed will continue to rely on data, and it finds itself in a challenging position with declines on both aspects of its mandate. In the UK, business activity within the services sector experienced its slowest growth in five months during September. The S&P Global Services PMI decreased to 50.8, falling short of estimates and below August’s figure of 51.9. The disparity between the Federal Reserve and the Bank of England will influence the trajectory of GBP/USD. The Federal Reserve is anticipated to reduce rates by 25 basis points in the forthcoming meeting. On the other hand, the BoE is anticipated to maintain its current stance, with inflation recorded at 3.8% YoY in August and projected to increase to 4% in September.