GBP/USD Dips As UK Data Disappoints And US Employment Improves

Published: 4 Dec at 5 PM Tags: Dollar, Pound Sterling, America, UK, USA,

Earlier today the Pound edged away from a two-year high against the US Dollar as a measure of the UK services sector came in slightly below the expected level.

While the gauge stayed well above the 50 mark separating growth-from-contraction the result was a little disappointing, particularly given the positive UK manufacturing and construction reports released on Monday and Tuesday.

The imminent Bank of England policy meeting also weighed on the British asset and it posted its steepest decline against the ‘Greenback’ for five days.

According to London-based currency strategist Neil Mellor, the Pound has ‘had a stellar performance for quite some time and it’s only natural for people to take a little cash of f the table ahead of two big risk events’.

The BoE rate decision is the first big risk event and is due to take place at 12:00 GMT.

The second risk event to watch out for is the Autumn statement, which will be delivered by the Chancellor of the Exchequer tomorrow.

GBP/USD declines were extended slightly during the North American session as data showed that the US trade deficit narrowed in October as exports reached record levels in the world’s largest economy.

While the shortfall, at 40.6 billion Dollars, was a little worse than the 40.0 billion Dollar’s estimated, it was an improvement on September’s negatively revised deficit of 43.0 billion Dollars.

The result prompted this response from global economist Jay Bryson; ‘We are starting to see some recoveries abroad, and in general, stronger global growth is going to lead to a pick-up in export growth over time. Consumers are two-thirds of the economy, and consumer spending continues to grind higher. All components of domestic demand outside of the government are growing’.

The US Dollar received additional support from a positive ADP employment change figure, which sparked hopes that Friday’s US non-farm payrolls report will be stronger than expected.

As the employment sector contributes hugely to the Federal Reserve’s policy decisions a surprisingly strong result on Friday could encourage the central bank to announce the tapering of stimulus at its December meeting.

The GBP/USD outlook is consequently neutral-negative.
As of Wednesday, 4th December 2013, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP USD exchange rate was 1.6377,

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