- Traders of GBP/USD are exercising caution ahead of Jerome Powell’s speech at the Jackson Hole Symposium.
- The preliminary S&P Global US Composite PMI increased to 55.4 in August from 55.1 previously.
- UK consumer confidence has improved, rising from -19 in July to -17 in August.
GBP/USD has shown minimal movement following four days of losses, trading around 1.3410 during the Asian session on Friday. The pair has faced headwinds as the US dollar strengthened on the back of significant economic data released on Thursday. Market participants are keenly awaiting insights from Jerome Powell’s upcoming remarks to gauge the policy direction for September.
The S&P Global US Composite PMI saw some uptick in August, with the index climbing to 55.4 from 55.1. In addition, the US manufacturing PMI increased from 49.8 to 53.3, exceeding the forecast of 49.5. The services PMI dipped slightly from 55.7 to 55.4, although it was still above the anticipated 54.2. Moreover, initial unemployment claims in the US rose to 235,000 last week, surpassing the expected 225,000, suggesting a slight softening in the labor market.
This robust PMI data coupled with rising jobless claims presents a challenge for the Federal Reserve as it attempts to assess persistent inflationary pressures in light of a softer labor market. The CME FedWatch tool indicates that futures traders are pricing in an 82% chance of rate cuts in September, dropping to 74% as of Wednesday.
Austan Goolsbee, President of the Bank of Chicago, noted that the Federal Reserve was receiving mixed signals about the economy, with a key meeting scheduled for Thursday. Meanwhile, Boston Fed President Susan Collins indicated a willingness regarding potential September rate cuts, acknowledging the headwinds and possible weaknesses in the labor market.
Consumer confidence in the UK has seen an uplift, with the GFK index moving from -19 in July to -17 in August, marking a year-long high, bolstered by expectations surrounding interest rate cuts from the Bank of England. Nonetheless, sentiment remains fragile, as households navigate stubborn inflation, increasing unemployment risks, and impending tax hikes.
