Economic News

GBP/USD – British Pound Jumped US Dollar

GBP/USD – British Pound Jumped US Dollar

British pound jumped 0.82% yesterday, as the currency has rebounded from its worst week of the year. GBP/USD went down 2.53% last week, as the USD has found strength after weeks of beating a retreat. GBP/USD climbed yesterday after US New home sales dropped to 511 thousand in July, down from 585 thousand in August which is well below expectations.

The UK Manufacturing PMI crashed into contraction territory in August. The index fell to 46.0, down from 52.1 in July and shy of the estimate of 51.1. The dismal reading is part of a pan. European downward trend in manufacturing, which has been made worse by the prolonged war in Ukraine. Output has been an obstacle by higher costs, a drop in demand and supply chain problems.

There was better news from Services PMI, which was almost unchanged at 52.5, pointing to weak expansion. Still, it’s hard to see how the UK can avoid a recession with weak growth and increasing inflation. Business expectation is dropping, and that will likely lead to a cutback in spending, hiring and investment, which won’t help the economy one bit.

There is plenty of anticipation ahead of Jerome Powell’s speech at Jackson Hole on Friday, but investor’s shouldn’t ignore some major events before Powell’s speech. Durable goods orders will be published Today, with the headline reading expected to slow to 0.6% in July, down sharply from 2.0% in June. Thursday brings US GDP for Q2, which is expected to come in at-0.8% QoQ, after a 0.9% reading in the first quarter. With the Fed stating that US data will be critical in determining its rate policy, the dollar would show some movement after these releases, just as it fell sharply today after the soft New Home Sales reading.