Pound US Dollar Exchange Rate Subdued ahead of Cost of Living Plan
The Pound US Dollar(GBP/USD) exchange rate is trading in a narrow range this morning. Ahead of the expected publication of Chancellor Rishi Sunak’s £10bn cost of living support package.
At the time of writing the GBP/USD exchange rate is trading at around $1.2577, virtually unchanged from this morning’s opening levels.
Pound (GBP) to Firm as Chancellor to Outline Support for Households?
The Pound (GBP) is mostly rangebound this morning. As the UK government is set to outline plans to support UK households during the cost of living crisis.
Reports suggest Chancellor Rishi Sunak will announce a £10bn support package. Households are expected to receive a £400 grant for energy bill. Funded by a windfall tax on oil and gas firms.
The announcement could help to bolster the Pound US Dollar exchange rate today. Analysts suggest the support package may offer the Bank of England (BoE) more room to raise interest rates.
Economists at ING, suggest:
‘The potential announcement of a £10bn fiscal stimulus to address the cost of living crisis could be a means-targeted measure coming through energy bills. What could this mean for Sterling? The positive could be that it allows the Bank of England (BoE) more freedom to hike.’
In the meantime, the Pound faces headwinds as a result of subdued risk appetite and rising Brexit risks.
As the UK government remains committed to unilaterally altering the Northern Ireland protocol, GBP investors are growing increasingly unnerved by the prospect of a UK-EU trade war.
US Dollar (USD) Stable in Cautious Trade
The US Dollar (USD) is holding its ground this morning amid a prevailing risk-off mood.
The upside in USD exchange rates appears limited however ahead of the latest US GDP release.
The latest estimate of growth looks set to confirm the US economy contracted in the first three months of 2022.
Confirmation of the contraction could actually boost the US Dollar however as it could stoke concerns over global growth. Underpinning demand for safe-haven assets such as the ‘Greenback’.
Pound US Dollar Exchange Rate Forecast: Fall in US Personal Spending to Weigh on USD?
The Pound US Dollar exchange rate could receive a boost at the end of this week, with the release of the latest US personal spending figures.
April’s figures are expected to report consumer spending slowed in the face of surging inflation.
Alongside an expected dip in the accompanying core PCE price index, which may further dent bets for a 75bps rate hike from the Fed in June and July.
Meanwhile, the absence of any notable UK economic data could leave the Pound without any strong directional bias on Friday.