US dollar news: GBP/USD climbing on mixed US data

With the UK services PMI exceeding forecasts and the US variant declining unexpectedly, the GBP/USD exchange rate recovered earlier losses, climbing by 0.4 per cent and hitting a high of $1.249.

The US Markit services PMI came in at 52.8 in March – down from an initial estimate of 52.9 and less than the 53.1 result expected.

ISM’s equivalent of the service sector index also declined last month, falling from 57.6 to 55.2.

IHS Markit economist Chris Williamson said of the US stats; “The March PMI numbers add to the picture of a relatively modest opening quarter to 2017 for the US economy.

The surveys of manufacturing and services are running at levels consistent with GDP expanding by 1.7% in the first quarter. Growth of business activity appears to have peaked in January, sliding to a six-month low in March.”

Concerns about an upcoming meeting between US President Donald Trump and Chinese President Xi Jinping also helped the pound gain on the US dollar.

Trump will be tackling the Chinese premier on the thorny issue of trade, and given Trump’s well publicised views on the trading relationship between the US and China, there are concerns tensions between the two leaders could escalate rapidly.

However, US dollar losses were limited thanks to an impressive ADP employment change report.

The data was expected to show that the US economy added 185k positions in March, but 263k jobs were actually created. This was up from February’s negatively revised figure of 245k.

Small, midsized and large businesses all reported job growth, with the goods producing and service producing sectors adding the most positions.

Information technology was the only sector to report a job decline in March, with a dip of 10,000 roles.

The ADP report is often considered to offer an indication of whether the more influential non-farm payrolls data will print strongly, so this could mean the US will be releasing more encouraging labour market data on Friday.

As an over performing employment sector could encourage the Federal Reserve to reconsider its plans to increase interest rates just twice more in 2017, the ADP number helped counter the impact of the day’s disappointing services figures. 

However, economists are currently expecting a change in non-farm payrolls of 177k on Friday, significantly less than February’s 235k. This result would leave the US unemployment rate at 4.7 per cent and could put the US dollar under pressure before the weekend.