GBP/USD Slips Back Below $1.31 as US Inflation Surges

GBP/USD Exchange Rate Flat Following US CPI Figures

UPDATE: The Pound Sterling to US Dollar (GBP/USD) exchange rate fall back from its best levels this afternoon, sliding below $1.31 following stronger-than-expected US CPI figures.

Headline inflation was shown to have leapt from 1.5% to 1.9% in March, beating forecasts it would rise to 1.8% and leaving it just shy of the Federal Reserve’s target rate.

This is likely to just be the calm before the storm however, with the upcoming emergency EU summit on Brexit and publication of FOMC minutes likely to prompt a more notable reaction in GBP/USD this evening.

GBP/USD Exchange Rate Buoyed by Better-than-Expected UK GDP Growth

The Pound Sterling to US Dollar (GBP/USD) exchange rate is on a solid footing this morning as some robust UK GDP figures lent some support to Sterling ahead of this evening’s EU summit.

At the time of writing the GBP/USD exchange rate is virtually unchanged, leaving the pairing trading at $1.31 on the inter-bank market.

Pound (GBP) Steady as UK Economy Continues to Grow

While all eyes are on the EU summit taking place later this evening, the Pound (GBP) has been able to edge higher against the US Dollar (USD) this morning thanks to the UK’s latest GDP figures.

According to data published by the Office for National Statistics (ONS) the UK economy grew 0.2% in February.

While this was down from the 0.5% growth seen at the start of the year it beat market forecasts that growth would have stalled at 0%.

This helped to alleviate concerns that the UK economy may stagnate in the first quarter, much to the relief of GBP investors.

Providing further support to Sterling this morning were the accompanying industrial production figures, with production holding at 0.6% in February against forecasts of a slowdown to 0.1% thanks to a particularly strong performance in the manufacturing sector.

The ONS reported:

‘Following a period of contraction, output in production and manufacturing has risen for the second month in a row, the latter driven by domestic demand. Manufacturing is now at its highest level since April 2008.’

US Dollar (USD) Muted amidst Modest Upswing in Risk Appetite

At the same time, the US Dollar (USD) is facing some headwinds this morning as demand for the safe-haven US currency was clipped by a modest uptick in market risk appetite.

There didn’t appear to be any particular catalyst behind this improvement in risk sentiment however, especially in the face of some high impact events taking place later this afternoon.

GBP/USD Exchange Rate Forecast: Will a Brexit Extension Help to Boost Sterling?

Looking ahead, any notable movement in the Pound US Dollar (GBP/USD) exchange rate today is likely to revolve around this evening’s emergency EU summit.

The high-level meeting will see EU leaders deliberate on whether to give the UK another Brexit delay, with Sterling expected to rally amid speculation that Theresa May will be offered a longer flexible extension.

Conversely, GBP exchange rates may fall sharply if EU leaders do not unanimously agree to the delay as it leaves the UK on a path towards a no-deal Brexit on Friday.

Meanwhile USD investors will likely be focused on the publication of the minutes from the Federal Reserve’s March policy meeting, with a cautious outlook from the bank potentially denting the appeal of the ‘Greenback’.

However in the meantime the US Dollar could find some support with the release of the latest US CPI figures, with economists forecasting that inflation will have strengthened in March, potentially helping to dispel some concerns that US economic activity is slowing.


Matthew Andrews

Contact Matthew Andrews