(Updated 16:47 09/06/22)
The Pound US Dollar (GBP/USD) exchange rate has continued trading within a narrow range today. An above-forecast rise to US jobless claims may have kept any upward momentum for the currency pair limited. Additionally, an underwhelming speech from UK PM Boris Johnson did little to shake the Pound’s woes and likely weighed on the exchange rate.
At time of writing the GBP/USD exchange rate is at around $1.2525, virtually unchanged from this morning’s opening figures.
Pound US Dollar (GBP/USD) Exchange Rate Rangebound as Confidence in Johnson Remains Fragile
The Pound US Dollar (GBP/USD) exchange rate is trading narrowly today. The currency pair is under pressure from continued political uncertainty in the UK following a vote of no confidence in PM Boris Johnson. Additionally, expectations of aggressive rate hikes from the Federal Reserve could also be keeping pressure on the GBP/USD currency pair lower.
At time of writing the GBP/USD exchange rate is at around $1.2526, virtually unchanged from this morning’s opening figures.
Pound (GBP) Falls as Cost-Of-Living Crisis Intensifies
The Pound (GBP) is dropping against its competitors today. The UK’s current political turmoil is likely continuing to keep pressure on Sterling today. PM Boris Johnson survived a no confidence vote on Monday although confidence in his premiership remains fragile. Gloomy forecasts for the UK economy may also be pushing GBP lower today, as well as a retreat to global risk appetite.
148 Conservative MPs voted against Johnson in Monday’s vote. The PM’s supporters had been hoping that the vote would ‘draw a line’ under any further rebellions.
Rebel MPs have hinted however that further challenges to Johnson’s leadership may be on the horizon. This uncertainty could cause Sterling to tumble lower.
Johnson is expected to give a speech today detailing additional financial support for UK households amid the country’s cost-of-living crisis.
Petrol prices saw their biggest daily jump in 17 years on Wednesday, whilst forecasts from the British Chamber of Commerce (BCC) today outlined how the country’s economy would ‘grind to a halt’ and then contract this year. The predictions could see the Pound drop further today.
Further Brexit-related headwinds may also limit any potential gains for GBP today. Tensions over the Northern Ireland protocol have become inflamed again in recent days.
US Dollar (USD) Edges Higher amid Risk-Off Mood
The US Dollar (USD) is trending higher many of its competitors today amid a risk-off market sentiment. Hopes of an aggressive rate hike from the Federal Reserve at their meeting next week are likely helping to bolster USD today. Additionally, an uptick to US Treasury bond yields may be continuing to act as tailwinds for the currency.
The risk-off market mood comes amid fears of a global economic slowdown. These worries are likely continuing to drive investors toward the safe-haven ‘Greenback’. The war in Ukraine is increasing concerns that grain, food, and energy prices could continue to climb and cause higher inflation.
The potential rise to inflation is increasing expectations of a series of aggressive rate hikes from the Fed. Speaking last week, Fed policymaker Loretta Mester stated she would continue to support rate hikes unless she saw ‘compelling evidence’. This in turn may be helping to bolster USD today.
The prospect of easing inflationary pressures may be limiting gains for the currency and muddying the Fed’s outlook, however. Investors are keenly awaiting US inflation figures on Friday which are currently forecast to fall.
GBP/USD Exchange Rate Forecast: Will US Inflation Fall as Predicted?
The Pound (GBP) will see no further significant data this week, so it’s likely that UK political issues will continue to be the main driver of Sterling’s movements. Boris Johnson’s speech at midday today could harm confidence in the currency if it doesn’t deliver any concrete support measures.
For the US Dollar (USD), initial jobless claims figures could bolster the currency should they print as forecast. A drop to May’s inflation rate could see USD dip however should investors take it as a sign of reduced changes of a Fed rate hike.