Pound US Dollar Exchange Rate Retreats amid UK Cost of Living Concerns
The Pound US Dollar (GBP/USD) exchange rate is faltering amidst the soaring cost-of-living crisis.
At time of writing the GBP/USD exchange rate is trading around $1.2582, down roughly 0.5% from this morning.
Pound (GBP) is Softening amid Heightening Cost-of-Living Fears
The Pound (GBP) is sliding against its peers today as the maelstrom of political and economic pressures grow.
Despite the support package outlined by Chancellor Rishi Sunak last week, the cost-of-living crisis continues to pressure the Pound. With the Federation of Small Businesses (FSB) yesterday warning half a million small companies are on the verge of folding within weeks.
UK consumer credit rose more than expected today, by more than £1.4bn compared to a downwardly revised £1.3bn rise in March.
The latest figures make it the third consecutive month where borrowing has been higher than the 12-month pre-pandemic average of £1bn. Meanwhile, mortgage approvals fell to their lowest level since June 2020.
The figures highlighted the worrying trend of more households in the UK having to turn to credit cards and other forms of debt just to keep their heads above water.
This could weigh heavily on the Pound, deterring investors amidst the worsening cost-of-living crisis.
Also pressuring the Pound is the ongoing fallout from Sue Gray’s ‘partygate’ report.
With more Conservative MPs publicly calling for Boris Johnson’s resignation, reports suggest we may be nearing the 54 letters requite to trigger a no-confidence vote.
Continued political turbulence could sap demand for sterling.
US Dollar (USD) Recovers Modestly as Risk-Off Mood Prevails
The US Dollar is trending up against its rivals today as demand for the safe-haven currency is bolstered by a souring market mood.
Reinforcing these gains is the rebound in US Treasury yields, following their slump in holiday-thinned trade at the start of the week.
The rise comes despite some USD investors questioning the Federal Reserve’s commitment to aggressive hike rates in the wake of downbeat inflation and growth figures.
Further capping any support for the US Dollar is the cautious mood ahead of a host of a meeting between President Joe Biden and Fed Chair Jerome Powell.
Pound US Dollar Forecast: US Data to Buoy Pound?
With no major data for the Pound to look to, all focus will be on a flurry of US data to be released this week. A predicted drop in US consumer confidence could hurt the ‘greenback’, along with an expected slowing of US services sector growth could rob the US Dollar of some support.
President Biden is set to meet Fed Chair Powell later today in a relatively rare meeting, to focus on the President’s concerns about inflation and the road to recovery. Any further hints at the Fed’s monetary policy going forward could influence GBP/USD.
Capping any potential gains for the Pound are the ongoing concerns with Brexit and the political headwinds caused by the uncertainty surrounding Boris Johnson’s future as Prime Minister.