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Pound Sterling has retreated amidst a U.S. Dollar recovery linked to above-consensus U.S. economic data.
U.S. bond yields and the Dollar rose after new data confirmed inflationary pressures in the U.S. economy continue to build, lowering the odds of a Federal Reserve interest rate cut.
The market now thinks the Fed won’t cut interest rates again before July, underscoring the ‘higher for longer’ interest rate thesis that has underpinned the Dollar rally which has been in place since October 2024.
The ISM services PMI survey found that prices paid by businesses reached the highest level since February 2023.
Above: PMI prices paid points to rising inflationary pressures.
This after the U.S. ISM Non-Manufacturing PMI headlined at 54.1 in December, up from 52.1 in November and ahead of consensus estimates for 53.5.
U.S. JOLTS Job Openings increased to 8.098MN in November, easily beating expectations for 7.740MN and the previous month’s 7.744MN.
to Dollar exchange rate fell back to 1.25 in the wake of these data that pointed to a heating U.S. economy, which constrasts notably with the stagnating UK economy.
The Dollar will also stay supported amidst market uncertainty linked to President-elect Donald Trump’s tariff plans.
There was talk Monday that he was watering down plans, but the man himself refuted such rumours, which prompted the U.S. Dollar to recover from earlier losses.
“It does feel like this could well set the tone for the year ahead – plenty of conflicting ‘sources’ reporting, with a ton of Trump social media posts in the mix as well, all creating a messy backdrop for traders to operate in,” says Michael Brown, Senior Research Strategist at Pepperstone.
An original version of this article can be viewed at Pound Sterling Live
