GBP/USD has inched higher in Wednesday trade. In the North American session, the pair is trading at 1.3230, up 0.18% on the day. On the release front, UK Construction PMI slowed to 51.9, well off the forecast of 54.3 points. In the US, ADP Nonfarm Employment Change rebounded with a reading of 178 thousand, but this was short of the forecast of 187 thousand. Thursday will be busy, as the UK releases Services PMI and the BoE will publish the benchmark interest rate and the inflation report. The US releases two key events – unemployment claims and ISM Non-Manufacturing PMI.
The pound continues to trade at high levels, and on Wednesday, GBP/USD touched a high of 1.3246, its highest level since September 2016. The week started off positively, as Manufacturing PMI in July improved to 55.1, beating the estimate of 54.4 points. Construction PMI could not keep pace, slowing to 51.9, its weakest reading since August 2016. The indicator reflects weakness in the construction industry, as commercial building and housing activity softened in July. With investors already jittery about what toll Brexit will take on the economy, weak numbers could push the pound to lower levels.
The US dollar has softened against its rivals, and even a strong gain from US Advance GDP last week failed to stem the greenback’s slide. The first GDP report for the second quarter came in at impressive 2.6%, beating the estimate of 2.5%. This strong expansion should put to rest concerns of a second straight quarter of weak growth – Final GDP came in at just 1.4%. Still, EUR/USD soared in July, gaining 3.5%. Investors remain concerned that low inflation in the US could mean that the Fed will balk and not raise interest rates in December, despite all but promising to increase rates three times in 2017. In June, Fed Chair Janet Yellen dismissed low inflation as "transient", but she has since changed her tune, as economists remain at a loss to explain why a red-hot economy has not translated into stronger wage growth, and hence higher inflation. The markets are skeptical about a December hike, with the odds at just 42%, according to the CME Group.
