GBP/USD holds its ground and trades modestly higher on the day above 1.2950 in the European morning on Thursday. Pound Sterling could benefit from an improving risk mood in the second half of the day and stretch higher.
The US Dollar (USD) preserved its strength on Wednesday and caused GBP/USD to drop to its weakest level since mid-August near 1.2900. The USD capitalized on rising US Treasury bond yields and found demand as a safe-haven, while Wall Street's main indexes declined sharply after the opening bell.
The data from the UK showed on Thursday that the business activity in the private sector expanded at a softening pace in early October. S&P Global/CIPS Composite PMI declined to 51.7 in October's flash reading from 52.6 in September.
Commenting on the survey's findings, "a further cooling of input cost inflation to the lowest for four years opens the door for the Bank of England to take a more aggressive stance towards lowering interest rates, should the current slowdown become more entrenched," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.
The weekly Initial Jobless Claims and October S&P Global PMI data will be featured in the US economic docket on Thursday. In case the number of first-time applications for unemployment benefits decline sharply, with a reading below 220K, GBP/USD could have a hard time pushing higher. On the other hand, the USD is likely to lose interest if the Composite PMI unexpectedly falls below 50 from September's print of 54.
Meanwhile, S&P 500 Futures and Nasdaq Futures were last seen rising 0.45% and 0.75, respectively. If risk flows dominate the action in financial markets in the American session, the USD could find it difficult to stay resilient against its peers.
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