Pound Sterling US Dollar Exchange Rate News: GBP/USD Muted Following Powell Comments

GBP/USD Exchange Rate Stabilises after Powell Driven Dip

The Pound Sterling to US Dollar (GBP/USD) exchange rate is trading in a narrow range this morning, with the pairing having stabilised after weakening yesterday evening following a speech by the Federal Reserve’s Jerome Powell.

At the time of writing the GBP/USD exchange rate is trading at $1.2677 this morning, virtually unchanged from its opening levels.

US Dollar (USD) Buoyed by Powell Comments

Trade in the US Dollar (USD) remains robust this morning, following comments made by Federal Reserve Chairman Jerome Powell on Tuesday evening.

Speaking in New York Powell reassured USD investors over the Fed’s independence, stating the US central bank is ‘insulated’ from politics.

Powell said:

‘The Fed is insulated from short-term political pressures — what is often referred to as our ‘independence.

‘Congress chose to insulate the Fed this way because it had seen the damage that often arises when policy bends to short-term political interests. Central banks in major democracies around the world have similar independence.’

Powell’s comments come hot on the heels of another barrage of tweets from President Donald Trump criticising the Fed’s monetary policy, in which he accused the bank of ‘blowing’ the US economic recovery by keeping interest rates too high.

Furthermore Powell appeared less dovish than expected over the prospect of rate cuts, with his suggestions that the Fed would act ‘as appropriate’ lifting the US Dollar as it suggested markets may have been a little over-zealous in pricing in a July rate cut.

Pound (GBP) Steady Following UK Mortgage Figures

Meanwhile the Pound (GBP) is holding its ground against the US Dollar (USD) this morning as markets reacted to the UK’s latest mortgage figures.

According to data published by UK Finance, banks approved 42,384 mortgages in May, up 8.7% from a year earlier and holding close to the two-year high struck in April.

However this still resulted in mortgage approvals undershooting expectations, limiting the potential upside in Sterling.

GBP/USD Exchange Rate Forecast: Contraction in Durable Goods to Weaken the US Dollar?

Looking ahead, the Pound to US Dollar (GBP/USD) exchange rate may be able to bounce back later this afternoon, following the publication of the latest US durable goods figures.

Economists forecast that goods orders will have contracted again last month, abet at a more modest pace than in April.

This could increase the pressure on the Fed to lower interest rates in the near term, something which could drag on the US Dollar.

Meanwhile. For GBP investors the focus is likely to return to UK politics, where uncertainty over the Conservative leadership election is expected to limit appetite for Sterling, especially as the risks of a no-deal Brexit appear to be on the rise.

Matthew Andrews

Contact Matthew Andrews