GBP/USD trims some of its weekly losses, clings to 1.3540’s

• The risk-on market sentiment struck government bond yields and the US dollar.
• UK’s IHS Markit Manufacturing PMI came at 57.1, better than expected.
• US ISM Manufacturing PMI shows expansion in the overall economy, according to the ISM.

The GBP/USD is staging a recovery, trading at 1.3547, up more than a half percent during the day at the time of writing. The British pound comeback has been substantial, as it paired more than half of its losses of the last three days.

Risk-on market sentiment improvement weighed on the US dollar

Market sentiment improved throughout the New York session. US stock indices finished the week in the green. The S&P 500, the Dow Jones Industrial, and the Nasdaq Composite recorded gains of 1.15%, 1.43%, and 0.82%, respectively. Meanwhile, the US T-bond yields fell for the second day in a row, with the 10-year benchmark note falling short of 1.50%. In the same tenor, the US Dollar Index (DXY), which measures the buck’s performance against six rivals, closed at 94.07, lost 0.20%.

During the European session, the Chartered Institute of Purchasing & Supply and IHS Markit Economics released the situation in the UK manufacturing sector (PMI). The figure rose to 57.1, better than 56.3 foreseen by analysts. Despite the superb reading, Rob Dobson, Director of HIS Markit, commented that “production growth is severely impacted by the ongoing strain across supply chains and, with demand far exceeding supply, the inevitable result has been higher prices, which will ultimately hurt the pockets of consumers.”

Across the pond, the Fed’s favorite figure for inflation, the Core Personal Consumption Expenditure Index for August, heightened by 3.6% on a year-over-year basis, as foreseen.

Moreover, the Consumer Confidence released by the University of Michigan rose to 72.8 more than 71 foreseen. Although it remained near pandemic lows, American citizens are somewhat more optimistic about current economic conditions.

Additionally, the ISM Manufacturing PMI for September rose to 61.1, better than the 59.6 expected by analysts. 

“Manufacturing performed well for the 16th straight month, with demand, consumption, and inputs registering monthly growth, despite continuing unprecedented obstacles and ever-increasing demand. Panelists’ companies and their supply chains continue to struggle to meet demand due to difficulties in hiring and a clear cycle of labor turnover, as workers opt for more attractive job opportunities,” ISM Chair Timothy Fiore said.

In the UK’s docket, medium to high-tier economic data is absent in the next week. On the other hand, the American economic docket will feature the US ISM Services PMI for September to be released on Tuesday. Further, on Wednesday, the ADP Employment for September could prelude how the Nonfarm Payrolls reading could be once it is released on Friday.

KEY ADDITIONAL LEVELS TO WATCH