GBP/USD Exchange Rate Holds Ground Following UK GDP Figures
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently holding steady this morning as market react to the UK’s latest GDP figures.
At the time of writing the GBP/USD exchange rate is trading at $1.2478 this morning, virtually unchanged from its opening levels, but still dangerously close to a two-year low.
Pound (GBP) Stable Following Rebound in UK GDP
The Pound (GBP) is holding its ground against the US Dollar (USD) and the majority of its other peers this morning, following the publication of the UK’s latest GDP figures.
According to data published by the Office for National Statistics (ONS), the UK’s economy expanded by 0.3% in May, rebounding from a 0.4% contraction in April.
The data also showed that GDP held at 0.3% over the last three months, beating expectations it would slow to 0.1%.
— ONS (@ONS) July 10, 2019
Commenting on the data, Rob Kent-Smith, head of GDP at the ONS, said:
‘GDP grew moderately in the latest three months, with IT, communications and retail showing strength. Despite this, there has been a longer-term slowdown in the often-dominant services sector since summer 2018.’
However, with preliminary data indicating that growth will have slumped again in June, it looks almost inevitable that the UK economy will have contracted in the second quarter, the prospect of which is limiting the upside in the Pound this morning.
US Dollar (USD) Steady Ahead of Powell Testimony
At the same time, the US Dollar (USD) is currently in a holding position this morning as USD investors eagerly await Federal Reserve Chairman Jerome Powell’s appearance in US Congress later this afternoon.
During his testimony in front of the House Financial Services Committee, Powell will discuss the current state of the US economy, and what the Fed is doing to support it.
Powell’s comments will be a key focus for USD investors today as they look for any hints in regards to the Fed’s near-term outlook on monetary policy.
This could send the US Dollar soaring even higher this afternoon if Powell comes off as hawkish in his outlook for the US economy as it signals that any rates cuts by the Fed are likely to be fairly limited in scope.
GBP/USD Exchange Rate Forecast: Slide in Inflation to Hurt the US Dollar?
Looking ahead to the second half of the week, the Pound to US Dollar (GBP/USD) exchange rate may have a chance to recover with the release of the latest US CPI figures.
Economists forecast that the data will reveal that headline inflation in the US will have fallen again in June, striking a four month low of 1.6%.
However any downside in the US Dollar is likely to prove limited given that underlying inflation is expected to remain stable at 2%.
Meanwhile, we expect to see Sterling remain politically sensitive through the remainder of the week, with the continued uncertainty surrounding the Conservative leadership election and the rising threat of a no-deal Brexit likely limiting the appeal of GBP exchange rates.