(Updated 16:40 01/06/22)
The Pound US Dollar (GBP/USD) exchange rate continued to fall today. A robust JOLTS job openings reading as well as an above-forecast uptick to US manufacturing growth helped to push USD even higher. A hawkish stance from the Federal Reserve also likely boosted the US Dollar, as well as a risk-off market mood.
At time of writing the GBP/USD exchange rate is at $1.2468, which is around -1.12% lower than this morning’s opening figures.
Pound US Dollar (GBP/USD) Exchange Rate Dips amid Risk-Off Mood
The Pound US Dollar (GBP/USD) exchange rate is slipping lower today. An uptick to US bond yields and poor global economic outlook may be weighing on the currency pair today. Additionally, the UK’s cost-of-living crisis and challenges to PM Boris Johnson’s premiership could also be limiting gains for the GBP/USD pair.
At time of writing the GBP/USD exchange rate is at around $1.2583, which is down roughly -0.2% from this morning’s opening figures.
Pound (GBP) Slides as Prospect of Johnson Leadership Challenge Looms
The Pound (GBP) is ticking lower against many of its rivals today. Concerns over the stability of PM Johnson’s premiership may be denting confidence in the currency. Additionally, concerns over the long-term impact of the country’s cost-of-living crisis and fears of a possible recession may also be weighing on GBP.
Sterling could see further falls today after figures showed British manufacturing activity expanding at its weakest rate since January 2021. Manufacturing exports continued to struggle as manufacturing costs and selling prices rose rapidly last month.
The figures come amid a gloomy outlook for the country’s private sectors as whole. A survey conducted by the Confederation of British Industry (CBI) showed that British companies expected barely any growth in the coming months. The survey also showed that a majority of services companies expect sales to fall as households limit unnecessary spending.
CBI economist Alpesh Paleja said:
‘It’s worrying that expectations for private-sector activity have worsened, but unsurprising given that headwinds continue to intensify.’
The Pound may continue to suffer amid threats to Boris Johnson’s leadership this week. Johnson is facing the looming threat of a vote of no confidence after the Sue Gray report into the ‘partygate’ scandal. Conservative MPs have highlighted a loss of faith following the report’s revelations.
US Dollar (USD) Climbs after Hawkish Fed Remarks
The US Dollar (USD) is trending higher against many of its competitors today. An upturn to US Treasury bond yields may be helping to push the currency higher. Concerns over long-term global economic growth could also be pushing investors toward the safe-haven ‘Greenback’ today.
The rise to bond yields came after hawkish remarks from Federal Reserve Governor Christopher Waller. Speaking on Monday, Waller stated that he would support hikes that would take interest rates past the ‘neutral’ level.
In a speech delivered in Frankfurt, Waller said:
‘Over a longer period, we will learn more about how monetary policy is affecting demand and how supply constraints are evolving. If the data suggest that inflation is stubbornly high, I am prepared to do more.’
Waller’s comments have likely increased bets from investors that the Fed will be raising interest rates at their subsequent meetings.
GBP/USD Exchange Rate Forecast: Will US Labour Market Tighten Further?
With no further significant data releases for the Pound (GBP), the prospect of further UK-EU tensions could continue to pull the currency lower. If the leadership crisis surrounding Johnson escalates further then it could also harm confidence in Sterling.
For the US Dollar (USD), a drop to manufacturing sector growth later today push USD lower. Also later today, a forecast downturn to job opening figures in April could help benefit the currency. Friday’s Non Farm Payrolls figures could add to speculation of a tight labour market should they fall as predicted.