GBP/USD slides as NY manufacturing index surges to 15.60

GBP/USD fell as the dollar strengthened after the New York Fed's manufacturing index surged to 15.60 in July, more than double the 9.30 consensus estimate and well above June's 5.70 reading.

"The manufacturing beat shifts the narrative back to a hawkish Fed, which supports the dollar across the board," said Sarah Lin, markets analyst at Edgen.

The new orders sub-index climbed to 27.30 from 5.70 in June, while the employment gauge rose to 7.90 and the prices paid measure held at 53.20. The data overshadowed softer producer price figures a day earlier that showed headline PPI rising 5.50% year-over-year in June, below the 6.20% consensus. The dollar index held near 100.43, while the 10-year Treasury yield fell 4 basis points to 4.545%.

The dollar's revival puts pressure on sterling to hold above key support levels, with traders now focused on Thursday's US retail sales data and weekly jobless claims for further clues on the economy's resilience. A sustained break below current levels could open the path toward the 1.2700 area, according to technical analysts.

The pound had gained earlier this week as softer-than-expected US producer price data fueled expectations that the Federal Reserve could ease policy sooner. Wednesday's PPI report showed headline inflation rising 5.50% year-over-year, below the 6.20% consensus, while the core measure came in at 4.70% versus 5.20% expected.

But Thursday's manufacturing data reversed that momentum. The NY Empire State Index's surge to its highest level in months signaled that the industrial sector remains resilient despite elevated borrowing costs. The prices paid sub-index at 53.20 suggested input cost pressures persist, while the capital expenditures index slipped to 41.20 from 50.20.

Across the Atlantic, the Bank of England faces its own policy dilemma. UK services inflation remains elevated, but economic growth has shown signs of softening. The policy divergence between the Fed and the BoE will remain a key driver for GBP/USD in the coming weeks, with traders pricing in different rate trajectories for the two central banks.

The dollar's broader strength was reflected across major pairs, with EUR/USD slipping 0.19% to 0.8739 and the dollar index holding above the 100 level. Gold fell 0.67% to $4,042.50 as the stronger dollar weighed on commodities priced in the greenback.

This article is for informational purposes only and does not constitute investment advice.