- GBP/USD trimmed earlier gains nearby the 1.1600 figure on positive US economic data.
- The US services sector improved while price pressures continued to ease.
- Kwasi Kwarteng, the so-called new Chancellor in the UK: “Truss government would not blow a hole in public finances.”
The GBP/USD tumbled toward its opening price after the US ISM Non-Manufacturing PMI, a gauge of the services sector in August, improved, while supply bottlenecks and price pressures eased.
The GBP/USD is trading at 1.1528, slightly above its opening price, after hitting a fresh weekly high around 1.1609, but better-than-estimated US data sent cable nosediving, reaching a daily low at around 1.1493.
The Institute for Supply Management reported that the US ISM Non-Manufacturing PMI was up 56.9 vs. 56.7 in July, above estimates of 54.9, according to Reuters. Some of the report’s highlights were New Orders ticking up to 61.8, higher than 59.9 in July, while the Prices Paid Index decelerated to 71.5 from 72.3.
The GBP/USD edged lower, registering a daily low at the data release, at 1.1493. However, it bounced off the lows toward the current exchange rate. At the same time, the US Dollar Index, a gauge of the buck’s value vs. a basket of peers, edged towards 110.390, up 0.73%.
Earlier during the day, Queen Elizabeth appointed Liz Truss as the new UK Primer Minister. In the meantime, Kwasi Kwarteng, set to be the UK’s next Chancellor of the Exchequer, said that the new government would not blow a hole in the public finances, as widely expected via the FT.
Kwarteng added that the new administration would act in “a fiscally responsible way,” adding that the Truss government would be “bold” in promoting growth. He noted, “Liz is committed to a lean state and, as the immediate shock subsides, we will work to reduce the debt-to-GDP ratio over time.”
Datawise, the UK economic docket featured the S&P Global CIPS Construction PMI for August, which came at 49.2, higher than July’s 48.9, but remained in contractionary territory. The all-sector PMI, which includes data from the services segment and manufacturing, dropped to 49.6 from 51.8 in July, reinforcing the challenges that the new UK Prime Minister Liz Truss would face.
What to watch
The UK economic docket will feature the Halifax House Prices for August, while on the US front, the Trade Balance, alongside Fed speakers, will shed some light on the economic conditions in the US.