The Pound Sterling (GBP) trades at 1.2920 against the US Dollar (USD) amidst weak manufacturing data from the US, indicating economic deterioration. The ISM Manufacturing PMI fell to 49 in March, down from 50.3 in February, missing the forecast of 49.5.
The US Department of Labor reported that job vacancies decreased to 7.568 million, below the expected 7.63 million. Manufacturing activity in the UK also declined, with the S&P Global dropping to 44.9, yet GBP/USD remained stable as the USD weakened.
Dollar Weakness Amidst Global Manufacturing Concerns
The US Dollar Index (DXY) decreased by 0.08% to 104.10. Bond market sentiment indicates rising recession risks, with potential impacts on inflation and employment due to tariffs.
In the coming week, important US economic data is expected, including the ISM Services PMI and Nonfarm Payrolls for March. The UK will also release its Construction PMI.
In terms of technical outlook, GBP/USD requires a move above 1.2972 to test 1.30, while a decline below 1.2900 could lead to further support at 1.2865 and 1.2805.
The British Pound showed varied performance this week against major currencies, with the strongest gain against the Swiss Franc.
Market Volatility Driven By Diverging Fundamentals
What we are seeing here is a combination of underwhelming economic indicators on both sides of the Atlantic. The lower-than-expected ISM Manufacturing PMI in the US implies a cooling in output and factory activity, slipping just under the neutral 50 mark. That signals industry contraction – the kind of metric that doesn’t sit well with medium-term USD strength. At the same time, the drop in job openings, landing below consensus, hints that the labour market may be losing steam faster than earlier thought.
Bond traders are factoring in more than just data points – recession concerns, among others, are becoming harder to ignore. Yield movements suggest a re-evaluation of growth assumptions, particularly as tariffs cast a longer-term shadow on inflation expectations. The weakening in the DXY – not large in absolute terms but telling – gives further evidence of cautious positioning towards the greenback.
From a UK perspective, a similar contraction in its own manufacturing sector – based on the S&P Global data – might have ordinarily weighed on the Pound. But the fact that GBP didn’t fall sharply tells us something about the relative story and where markets think momentum lies. The USD’s softening helped the currency pair hold, even gain ground.
Looking ahead, the next round of US data – especially the ISM Services PMI and Nonfarm Payrolls – should be watched closely. These two releases will offer more insight into whether weakness in manufacturing is bleeding through to more resilient sectors like services and employment. The UK’s Construction PMI is of interest but has historically carried less currency impact unless wildly off course.
Technically, the picture has become clearer. The 1.2972 level is seen as the near-term ceiling. Breaking through it would take us into the psychological 1.30 zone – a round number often associated with headline reactions and algorithmic triggers. That said, not breaching it—and worse, falling below 1.2900—could entice profit-taking or even some short positions. Below that level, 1.2865 and 1.2805 matter most on the downside.
Broadly, the divergence in macro conditions needs to be followed through not only in data but also in how central banks talk and act. Monetary policy expectations may shift quickly in either direction depending on these upcoming numbers. With the British Pound having outperformed some major currencies like the Swiss Franc, recent strength is more a reflection of weakness elsewhere than robust domestic fundamentals.
So, positioning needs to factor in near-term technical levels while keeping a close eye on data that could shift perception markedly. Reaction function, not just the data itself, will matter.
