Pound US Dollar Exchange Rate Could Jump On Rate Cut Hints at Jackson Hole Symposium

GBP/USD Exchange Rate Flat, Jackson Hole Symposium in Focus

The Pound US Dollar (GBP/USD) exchange rate is holding steady at $1.214 today, but Sterling could push higher later.

US markets expect a tense Jackson Hole Symposium today as both the US domestic and global economy continue to exhibit signs of a slowdown.

However, Credit Suisse, the Investment Banking Company, remain upbeat:

‘Given the gap between market rate expectations and [Federal Open Market Committee (FOMC)] projections, risks are for a hawkish surprise, in our view.’

Yesterday’s FOMC minutes suggest Federal Reserve policymakers regard the recent rate cut as part of a mid-cycle adjustment as a result of recent shifts in the economic outlook. However, the Fed also hinted at the possibility of more rate cuts in the near-term.

Willi Delwiche, an Investment Analyst at Baird, said:

‘The Fed clearly wants to be flexible. They are clearly worried about some of the global tensions that are out there, whether it is trade or Brexit or some of those international developments.’

The GBP/USD exchange rate could advance today if comments made at the Jackson Hole Symposium up the odds of a September rate cut.

US Dollar traders will also be focusing on the flash US Markit Manufacturing PMI for August, which is expected to improve from 50.4 to 50.5.

US jobs figures, forecast to improve in August, will also be released today.

GBP/USD Exchange Rate Steady, But Brexit Fears Rise as PM Boris Johnson Meets French President

Pound Sterling (GBP) exchange rates have been relatively static today, but traders remain jittery ahead of Prime Minister Boris Johnson’s meeting with French President Emmanuel Macron later today. Mr Macron said talks would be friendly but ‘frank’, with a focus on the ‘British democratic crisis’ over Brexit.

However, Christian Lequesne, Professor at Science Po, Paris, was critical of Boris Johnson’s approach:

‘It appears to be in Johnson’s interest to say that a no-deal exit would be the responsibility of the Europeans, and the French in particular, for not accepting his conditions. But on the French side, Macron’s line will be to say a no-deal exit is nothing to do with the Europeans, who have done everything to try to have an arrangement.’

This follows yesterday’s emphatic comments from the French government, which described a no-deal Brexit as the ‘most likely outcome’.

GBP/USD Outlook: Could the US Dollar Sink on Dovish Fed Forecasts?

US Dollar traders will be looking ahead to tomorrow’s speech from Fed Chair Jerome Powell at the Jackson Hole Symposium.

Any dovish signals from Mr Powell could bolster speculation for a Fed rate cut in the near-term, undermining market confidence in the US Dollar.

Tomorrow will also see the US new home sales figure for July, which is expected to increase from 0.646 million to 0.649 million.

Meanwhile, Sterling traders will stay focused on Brexit and the Irish backstop issue. If negotiations between the UK and the EU show signs of cracking, the Pound could fall against its peers.

David Moore

Contact David Moore