Pound US Dollar Exchange Rate Trading in Narrow Range in Cautious Trade
The Pound US Dollar (GBP/USD) exchange rate is directionless this morning amid caution ahead of Thursday’s US inflation release.
At the time of writing, the GBP/USD exchange rate is trading at approximately $1.3566, with minimal market movement from today’s opening levels.
US Dollar (USD) Directionless as Investors Await Inflation Figures
The US Dollar (USD) is trading flat against the Pound (GBP) as US investors ere on the side of caution ahead of tomorrow’s inflation release.
Economists forecast US inflation will have climbed from 7% to a dizzying 7.3% in January.
Should this print true, it will be the 6th consecutive month inflation has accelerated, and push it even further above the Federal Reserve’s target of 2%.
Another jump in inflation is likely to further fuel speculation that the Fed might opt for an aggressive interest rate hike of 50bps when it next meets in March.
In the meantime, a speech by Fed policymaker, Loretta Mester’s, will be eyed by USD investors as they look for any hints she might support a larger rate hike next month.
Pound (GBP) Mixed as Brexit Concerns Prevail
The Pound is rangebound against the US Dollar at the beginning of today’s session due to renewed Brexit concerns.
A report published by the Public Accounts Committee (PAC) suggests Brexit is negatively impacting UK trade volumes, with new border rules increasing both paperwork and waiting times for goods to be transported.
PAC Chair Meg Hillier, said:
‘One of the great promises of Brexit was freeing British businesses to give them the headroom to maximise their productivity and contribution to the economy – even more desperately needed now on the long road to recovery from the pandemic.
‘Yet the only detectable impact so far is increased costs, paperwork and border delays.’
However UK Government has attempted to ease Brexit concerns and is hopeful that Brexit will soon provide the possibilities that were promised during the referendum.
A Government spokesperson said:
‘Traders have adapted well to the introduction of full customs controls on 1 January, with minimal disruption at the border and inbound freight flowing effectively through ports.
‘We are continuing to ensure that businesses get the support they need to trade effectively with Europe and seize new opportunities as we strike trade deals with the world’s fastest growing markets, including one-to-one advice through the free-to-use Export Support Service.’
Pound US Dollar Exchange Rate Forecast: Will Fed Speech Impact USD?
Later today, a speech by Fed policymaker, Loretta Mester is likely to influence the Pound US Dollar exchange rate depending on the tone struck. A hawkish outlook could buoy USD exchange rates this afternoon.
Meanwhile, the Pound may be influenced this afternoon by a speech from Bank of England’s Huw Pill, if he touches on the bank’s monetary policy. Expect the Pound to strengthen if he is supportive of another rate hike in the near-term.