GBP/USD Exchange Rate Rangebound Following US Inflation Print
(Updated 14:00, 10/3/22) The Pound US Dollar (GBP/USD) exchange rate continues to trade with modest losses this afternoon, after US inflation printed in line with expectations.
According to data published by the US Bureau of Labor Statistics domestic inflation rose to 7.9% in February, up from 7.5% in January.
While this pushed US inflation to a new 40-year high it did not overshot expectations as previous US CPI releases have in recent months.
This could explain why the reaction in the GBP/USD exchange rate has been muted far this afternoon. At the time of writing the Pound US Dollar exchange rate is trading at roughly $1.3171.
Original article continues below:
Pound US Dollar Exchange Rate Subdued ahead of US Inflation Release
The Pound US Dollar (GBP/USD) exchange rate is ticking lower this morning as markets brace for the latest US inflation figures.
At the time of writing the GBP/USD exchange rate is trading at around $1.3169, virtually unchanged from this morning’s open levels.
US Dollar (USD) to Jump on Soaring Inflation?
The US Dollar (USD) looks poised to strengthen today as the US prepares to publish its consumer price index (CPI) later this afternoon.
Economists are forecasting today’s CPI figures will show US inflation continued to rocket higher last month. The market consensus is for inflation to soar from 7.5% to 7.9% in February, although in recent months US inflation has repeatedly overshot expectations.
Another inflationary shock could ripple through markets. Strengthening the US Dollar as it triggers wider concerns over how undue inflationary pressures could impact global growth.
Another strong inflation print is also likely to underpin Federal Reserve rate hike expectations and further bolster USD exchange rates.
The Fed is widely expected to deliver a quarter-percentage interest rate increase when it concludes its March policy meeting next week.
However, if inflation continues to run hotter than expected it could revive expectations for a half-percent hike. The pricing in of which could see the US Dollar recapture its recent highs.
Pound (GBP) Muted amid Ukraine Uncertainty
At the same time, the Pound (GBP) is struggling to attract support at the start of today’s session. The appeal of the currency being undermined by uneven risk appetite.
Wednesday brought a notable improvement in risk sentiment amidst hopes for a diplomatic solution to the war in Ukraine. Russian Foreign Minister Sergey Lavrov is to meet his Ukrainian counterpart Dmytro Kuleba for peace talks in Turkey today.
However, investors remain cautious ahead of the talks after Moscow indicated it is unwilling to compromise on any of its demands.
Elsewhere, retreating oil prices appear to be somewhat supportive of the Pound this morning. A pullback in crude prices helps to temper concerns over the rising cost of living in the UK and the potential drag this could be on economic growth.
Pound US Dollar Forecast: Rebound in GDP to Buoy the Pound?
Looking ahead to the end of this week, the Pound US Dollar exchange rate could receive some support from the publication of the UK’s latest GDP figures.
January’s monthly release is forecast to show the UK economy returned to growth amid an easing of Omicron cases, with GDP predicted to expand by 0.2%, having previously shrunk by 0.2% in December.
However, any upside in Sterling could be tempered by accompanying figures, which are expected to report growth in the three months to January actually slowed.
Meanwhile, Friday will also see the publication of the University of Michigan’s latest US consumer sentiment index.
Another drop in consumer morale in March could undermine the US Dollar, particularly after the index already struck a decade low in February.