Pound US Dollar Exchange Rate Holds at 10-Week High

GBP/USD Exchange Rate Buoyed by Lacklustre US Data 

(Updated 15:20, 12/1/22) The Pound US Dollar (GBP/USD) exchange rate remains on a positive trajectory this afternoon as the publication of some weaker-than-expected US data reinforces the current USD selling bias. 

Both US initial jobless claims and the latest Producer Price Index missed expectations, with jobless claims rising at the start of 2020 and PPI rising less than expected last month

In addition to a prevailing risk-off mood this has limited market appetite for the US Dollar this afternoon. 

At the same time, the Pound continues to face some resistance as a result of uncertainty over Boris Johnson’s premiership as he faces growing calls to resign for his role in a lockdown breaking social gathering at No10 in 2020. 

Original article continues below: 

Pound US Dollar Exchange Rate Strengthens amid USD Selloff 

The Pound US Dollar (GBP/USD) exchange rate is trending higher this morning, climbing to its best levels since October amidst a clear USD selling bias. 

At the time of writing the GBP/USD exchange rate is trading at around $1.3741, up roughly 0.3% from this morning’s opening levels. 

US Dollar (USD) Extends Post-CPI Losses 

The US Dollar (USD) remains on the back foot this morning, with the currency experiencing some sustained selling pressure following the publication of the US consumer price index on Wednesday. 

December’s CPI figures reported US inflation rocketed up to 7%, its highest levels since 1982.  

However, with some USD investors having priced in an even stronger print, and a March rate hike from the Federal Reserve also already fully priced in, the data triggered an unwinding of USD positions yesterday

Joe Manimbo, senior market analyst at Western Union Business Solutions, comments: 

‘The US Dollar’s problem though is that the market already has highly hawkish expectations for Fed policy this year. So as hot as today’s CPI price was, it merely reinforced what’s already baked in for the dollar and Fed policy.’ 

The US Dollar selling bias has likely been reinforced by a prevailing risk-on mood, with fading concerns over the Omicron Covid variant continuing to bolster market sentiment and limiting demand for the safe-haven currency. 

Pound (GBP) Tempered by UK Political Uncertainty 

At the same time, whilst it has been able to advance against the US Dollar, the Pound (GBP) is struggling to replicate this success against the majority of its other peers as Sterling sentiment is suppressed by political jitters in the UK. 

This comes as Prime Minister Boris Johnson is facing calls to resign from both the opposition and members of his own party after it came to light the PM attended a social gathering at No 10 during the first lockdown. 

It seems that Conservative backbenchers increasingly view Johnson as a liability after a number of scandals have seen the party’s polling number plummet. A leadership challenge could be invoked if 54 Tory MP’s send letters to the 1922 committee. 

With the PM’s future now in doubt, the threat of future political uncertainty is casting a long shadow over the Pound this morning. 

Pound US Dollar Forecast: Upbeat UK GDP Figures to Buoy Sterling? 

Looking ahead, the Pound US Dollar exchange rate could continue to accelerate through the end of this week’s session with the publication of the UK’s latest GDP release. 

November’s monthly growth figures are expected to report the UK economy expanded by 0.4%, after almost stalling in October. 

However, will the emergence of the Omicron variant towards the end of the month have impacted growth more than forecast? Expect the Pound to weaken if GDP misses. 

Meanwhile the US dollar could struggle to attract support on Friday as the latest US retail sales figures are expected to report sales growth stalled in December. 

Matthew Andrews

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