Pound to US Dollar Exchange Rate Avoids Losses amid Mixed US Inflation
Update 16:51 BST 12/09/2019:
The Pound to US Dollar (GBP/USD) exchange rate was able to avoid notable losses today, as the latest US data and central bank news failed to offer the US Dollar (USD) lasting support.
The latest US inflation rate was mixed, with the core rate beating forecasts but the overall print falling short.
US Dollar demand briefly rose after the European Central Bank (ECB) eased Eurozone monetary policy, but as the bank’s easing was not as aggressive as some speculated the US Dollar ultimately failed to benefit from Euro (EUR) weakness.
Pound to US Dollar Exchange Rate Steady Ahead of Key US Inflation Rate Report
The Pound Sterling to US Dollar (GBP/USD) exchange rate has struggled to hold its best levels this week, but has overall sustained strong gains. Investors have been hesitant to buy the US Dollar (USD) too much amid a lack of fresh support for the currency.
Since opening this week at the interbank level of 1.22, GBP/USD has seen a strong jump in demand due to UK data and Brexit hopes.
While GBP/USD has been unable to hold the monthly high briefly seen on Monday, the pair continues to trend in the interbank region of 1.23 at the time of writing on Thursday.
The US Dollar has been driven more by global risk-sentiment than US news this week, but with the Federal Reserve meeting next week that could change in the coming sessions.
Pound (GBP) Exchange Rates Continue to Find Support in Brexit Speculation
At the beginning of the week, the Pound (GBP) saw a surge in demand as UK recession fears were doused thanks to stronger than expected growth data.
Since then, the Pound has largely been able to sustain those gains. This has been thanks to continued speculation that a no-deal Brexit can be avoided.
On Monday, UK Parliament successfully passed a bill to prevent a no-deal Brexit. Since then, there has been speculation that a cross-party group of MPs could find a consensus on a softer Brexit deal in order to prevent a no-deal outcome.
Yesterday, Brexit hopes found further support thanks to news that Scotland’s highest court had found the government’s long prorogation of Parliament to be unlawful.
If parliament were forced to reconvene, it would offer MPs with more chance to prevent a no-deal Brexit.
US Dollar (USD) Exchange Rates Lack Drive amid Risk-Sentiment and Fed Uncertainty
Investors have had little reason to buy the US Dollar (USD) this week so far, leaving the currency to be driven more by shifts in movement of rivals and global factors like risk-sentiment.
US-China trade tensions have seemingly lightened this week, as the US delayed its latest round of tariffs on China ahead of expected negotiations over the next month.
As the US Dollar is a safe haven currency, the higher market trade optimism has left investors buying riskier US Dollar rivals instead.
The US Dollar has also struggled to strengthen amid continued speculation that the Federal Reserve could ramp up the dovishness in its upcoming policy decision.
Pound to US Dollar (GBP/USD) Exchange Rate Investors Await Key US Data
Most of the Pound to US Dollar (GBP/USD) exchange rate’s movement so far this week has been driven by the Pound’s (GBP) reactions to UK data and Brexit speculation. However, the US Dollar (USD) could drive the pair more in the coming days.
While the US economic calendar has been relatively quiet, key US ecostats are due for publication over the next day and the Federal Reserve will hold its anticipated September policy decision next week.
This afternoon, US inflation rate data from August will be published, and this will be followed by retail sales and Michigan consumer sentiment stats tomorrow.
US inflation and retail sales data could influence US interest rate cut bets and Fed speculation if they surprise investors. USD movement is likely to be more driven by Fed bets next week.
Of course, any surprising developments in Brexit or UK politics could drive the Pound to US Dollar (GBP/USD) exchange rate as well.