Pound US Dollar (GBP/USD) Exchange Rate Recovers amid Profit-Taking

(Updated 16:40 29/04/22)

The Pound US Dollar exchange rate continued to climb today. Pervasive profit taking kept the US Dollar buoyed as well as above-forecast PCE figures. The figures likely increased bets of a significant rate hike from the Federal Reserve next week.

At time of writing the GBP/USD exchange rate is at around 1.2560, which is up roughly 0.8% from this morning’s opening figures.

Pound US Dollar (GBP/USD) Exchange Rate Bolstered by Risk-On Impulse

The Pound US Dollar (GBP/USD) exchange rate is climbing higher today after having hit its lowest point since July 2020 yesterday. The US Dollar (USD) is falling amid profit-taking following multi-year highs earlier in the week. A risk-on impulse is helping the Pound (GBP) to recover some losses. A poor outlook for the UK economy is likely weighing on the currency however.

At time of writing the GBP/USD exchange rate is at around $1.2549, which is up around 0.7% from this morning’s opening figures.

Pound (GBP) Gains as Brexit Border Checks Delayed

The Pound (GBP) is benefitting from a risk-on impulse today after having fallen to fresh lows earlier in the week. Developments at the UK border concerning Brexit may also be helping to prop up the currency today. The UK’s poor economic outlook may be limiting upward movement for Sterling however.

Brexit opportunities minister Jacob Rees-Mogg announced on Thursday that the implementation of post-Brexit border checks would be delayed for a fourth time. Rees-Mogg claimed that the move would save a $1B a year and control rising living costs.

The news may be helping to bolster the Pound as analysts had feared the checks could cause chaos.

Major gains for the Pound could be limited today by fears over the country’s long-term prospects however. The UK economy has been undermined in the past week by a series of poor data releases. These figures have also seen markets reign in expectations of a more aggressive rate hike from the Bank of England (BoE).

US Dollar (USD) Drops as Investors Await Fed Rate Hike

The US Dollar (USD) is falling today amid likely profit-taking. The moves come after a risk-off market mood saw investors flock to the safe-haven ‘Greenback’ earlier in the week. A risk-on impulse today may also be keeping USD suppressed.

Losses for the US Dollar are set to continue to be limited by expectations of aggressive action from the Federal Reserve next week. Multiple Fed policymakers including Chair Jerome Powell have signalled that a 0.5% interest rate hike is possible.

Speaking last week, Powell stated that a 0.5% hike was ‘on the table’ for the central bank’s next meeting.

GBP/USD Exchange Rate Forecast: Will BoE Follow Fed’s Hawkish Path?

Looking ahead to next week for Sterling, a forecast downturn to growth in the UK’s manufacturing sector on Tuesday could pull GBP lower. The figures could also contribute to the pessimism surrounding the UK’s long-term outlook.

GBP investors will be most keenly awaiting the BoE’s interest rate decision on Thursday however. The central bank is largely expected to raise rates by at least 0.25% which could help bolster Sterling. If the BoE pursues a more dovish strategy however then it could push the Pound lower.

For the US Dollar, an uptick to personal sending later today could limit any potential losses for the currency if figures print as forecast.

The Fed’s interest rate decision on Wednesday could see USD soar should they raise rates as aggressively as expected.

Employment figures on Friday could limit gains for the currency however. Non farm payrolls are forecast to fall whilst unemployment is expected to remain unchanged.

Gareth Monk

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