Pound US Dollar (GBP/USD) Exchange Rate Trades Narrowly despite Return of Risk Appetite
The Pound US Dollar (GBP/USD) exchange rate continued to trade narrowly today despite a return of risk appetite in the markets. A downturn to US Treasury bond yields also helped to bolster the currency pair.
Whilst US retail sales rose above forecast, the market reaction to Waller’s earlier comments was limited and contributed to the US pullback.
At time of writing the GBP/USD exchange rate is at around $1.1852, virtually unchanged from this morning’s figures.
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Pound US Dollar (GBP/USD) Exchange Rate Trades Narrowly ahead of Key US Data
The Pound US Dollar (GBP/USD) exchange rate is trending sideways today. Dovish comments from Fed officials may be preventing major losses. Additionally, investors may be limiting bets on USD ahead of today’s retail sales figures.
At time of writing the GBP/USD exchange rate is at around $1.1827, virtually unchanged from this morning’s figures.
Pound (GBP) Slips as Summer Travel Disruption Expected
The Pound (GBP) is dropping against its rivals today. A retreat to risk appetite may be weighing on the currency amid fears of a global economic slowdown.
The prospect of widespread travel disruption across the UK this summer and its economic impact could be pushing the Pound lower. The RMT and Aslef unions have announced a train driver strike across 14 operating companies for two days in August.
The political uncertainty in the UK may also be continuing to cast a shadow over Sterling today. The leadership contest to replace Prime Minister Boris Johnson narrowed the field to 5 candidates on Thursday.
Brexit-related headwinds could also be limiting gains for the currency. A bill designed to alter elements of the agreement passed through the House of Commons this week with no alterations.
US Dollar (USD) Climbs as Fed Seeks to Downplay 1% Rate Hike Expectations
The US Dollar (USD) is making gains today, although has softened in trade against some of its safer competitors. A decline in US Treasury bond yields may be capping upward movement for USD.
The pullback in USD comes after Federal Reserve policymakers sought to downplay the prospect of a 1% interest rate hike.
Speaking on Thursday, Fed board member Christopher Waller warned that ‘markets may have gotten ahead of themselves a little bit’ and signalled his preference for a 0.75% rate hike.
Waller did leave room for more bullish bets, however. Waller signalled that hotter than expected retail sales figures could increase the chance of more aggressive action.
The prospect of a global recession may also be supporting USD today. The concerns come amid rising Covid-19 case levels in China as well as evidence of a slowdown in the world’s second-largest economy.
GBP/USD Exchange Rate Forecast: Will US Inflation Print Above Forecasts?
Looking ahead to the coming week for the Pound, employment figures on Tuesday could prompt movement in the currency. Unemployment rose to 3.8% in April and if May’s figures follow suit, then it could ease bets on action from the BoE and see Sterling slip.
Wednesday’s inflation figures for June could have the opposite effect, however. The rate of inflation is forecast to climb to fresh highs of 9.3%. If the data prints as forecast, then expectations of rate hikes from the BoE could increase and push GBP higher.
A drop to retail sales figures in June could help to push the beleaguered Pound lower if they print as forecast on Friday. Markets are likely to have priced in the Jubilee dip however, meaning their impact could be minimal.
For the US Dollar, today’s retail sales figures will be closely watched by investors. An above-forecast rise could increase expectations of a bumper rate hike from the Fed.
Initial jobless claims figures on Thursday could see USD tick lower if they rise as forecast. Investors may see the figures as signs of a cooling labour market.
A forecast downturn to US service sector growth could also pull the US Dollar lower on Friday if PMI figures fall as forecast.