Pound US Dollar Exchange Rate Dips Ahead of US Inflation Data

GBP/USD Exchange Rate Falls Despite Improving Risk Sentiment

The Pound US Dollar exchange rate dipped this morning despite improving risk-sentiment after the US and China have agreed to balance and promote trade and investment cooperation. The pairing is currently trading around $1.40.

The US Dollar edged higher against the Pound today, despite improving risk sentiment beginning to limit the appeal of the safe-haven ‘Greenback’.

Talks between the world’s two largest economies were reportedly ‘candid and pragmatic’.

Analysts at Bloomberg describe the developments between the two nations:

‘The two nations are slowly resuming official contact after the January change of administration in the U.S. Some parts of U.S. policy toward China are becoming clearer, but it’s still not publicly clear what the U.S. plans to do with the ‘Phase One’ trade deal signed last year or tariffs on Chinese goods.’

In US economic news, this afternoon will see the release of the latest US consumer price index for May, which is expected to rise by 0.4% month-on-month.

Annual inflation rose by 4.2% in April – its highest since 2008.

Federal Reserve policy makers, however, have said that they are comfortable with high levels of inflation and that they expect the situation to be ‘transitory’.

Any signs of an improving outlook for the US economy, however, would be drive-up the US Dollar.

Pound (GBP) Dips as UK Government Scientific Advisors Warn of ‘Substantial Third Wave’ of Covid-19

The Pound (GBP) fell today after the government’s Sage committees model suggests a heightened risk of a ‘substantial third wave’ of Covid-19 infections and hospitalisations. This has caused many to doubt whether the planned easing of lockdown measures will go ahead on 21 June.

Prime Minister Boris Johnson seemed more cautious on Wednesday, saying:

‘What everyone can see very clearly is that cases are going up and in some cases hospitalisations are going up. I think what we need to assess is the extent to which the vaccine rollout, which has been phenomenal, has built up enough protection in the population in order for us to go ahead to the next stage.

‘And so that’s what we’ll be looking at. And there are arguments being made one way or the other, but that will be driven by the data. We’ll be looking at that and we’ll be setting it out on Monday.’

As a result, GBP investors have become more pessimistic about the outlook for the UK economy, which would struggle if lockdown easing were to be delayed later this month.

Pound investors will be awaiting this afternoon’s speech from the Bank of England’s (BoE) chief economist, Andrew Haldane.

Any upbeat comments about the outlook for the UK economy or labour market would, however, buoy the GBP/USD exchange rate.

GBP/USD Exchange Rate Forecast: Could Fears of a Delay to UK Lockdown Easing Weigh on Sterling This Week?

US Dollar (USD) traders will be eyeing tomorrow’s release of the flash US Michigan consumer sentiment index for June.

Any signs of consumer morale rising in the US would prove US Dollar-positive.

However, if risk sentiment continues to improve this week, then the USD/GBP exchange rate could fall as investors seek out riskier assets.

Pound (GBP) investors will monitor tomorrow’s publication of that the latest GDP data for April, which is expected to rise by 2.4%.

The Pound US Dollar exchange rate could fall further this week, however, if the easing of lockdowns later this month appear increasingly likely to be delayed.

David Moore

Contact David Moore