GBP/USD Exchange Rate Consolidates Losses Following Tuesday’s Collapse
The Pound US Dollar (GBP/USD) exchange rate remains on the defensive this morning, with the pairing consolidating its losses after plummeting over 1% during yesterday’s session.
At the time of writing the GBP/USD exchange rate is trading at around $1.3514, down around 0.2% from this morning’s opening rate.
Pound (GBP) Reels from Aggressive Selloff
The Pound (GBP) is ticking lower against the US Dollar (USD) and the majority of its other peers this morning, following on from Tuesday’s collapse.
The Pound US Dollar exchange rate tumbled over a cent from $1.37 to $1.35 yesterday as the UK’s fuel crisis further undermined confidence in the resilience of the UK’s economic recovery.
Markets feared that the shortages at fuel pumps could see businesses face further headwinds, at a time when they are already struggling due to staff shortages and supply chain constraints.
Whilst the situation looks to be improving as the panic buying subsides, GBP investors are concerned that the UK’s wider supply crisis remains unsolved and that it could severely undermine economic activity in the last quarter of the year.
Piling additional pressure atop the Pound this morning is also the threat of renewed Brexit tensions as France and the UK look to clash over fishing licenses as the UK has only granted licenses to a small fraction of boats which have historic claims to fish in UK waters.
US Dollar (USD) Firms as Debt Ceiling Fears Weaken Risk Appetite
The US Dollar (USD), meanwhile, continues to attract support this morning as fears over the US debt ceiling sees investors favour safe-haven currencies.
Appearing before Congress on Tuesday, US Treasury Secretary Janet Yellen said that the US could reach its debt ceiling on 18 October, following the expiry of extraordinary measures implemented by her department.
This risks the US potentially defaulting on its debt, as US Senate Republicans seek to block efforts by the Biden administration to prevent a credit default.
Also bolstering safe-haven demand and underpinning the US Dollar are concerns over power outages in China, which are disrupting industrial activity in parts of the country and could further undermine the global economic recovery.
Pound US Dollar Forecast: Hawkish BoE Bailey to Offer Respite for Sterling?
Looking ahead, a speech by Bank of England (BoE) governor Andrew Bailey could help the Pound US Dollar exchange rate to claw back some of its losses later this afternoon.
Should Bailey strike a hawkish tone and reaffirm the possibility of the BoE hiking interest rates in early 2022 then it could help to offset concerns over the UK’s current economic headwinds.
However, any upside in the GBP/USD exchange rate may remain limited in scope so long as the gloomy market mood persists and continues to bolster the appeal of the safe-haven US Dollar.