Pound US Dollar (GBP/USD) Exchange Rate Trades Narrowly
(Updated 16:35 21/07/22)
The Pound US Dollar (GBP/USD) exchange regained some of its losses to trade within a narrow range today. A risk-off impulse within the markets has kept gains for the currency pair limited as investors looked toward the safe-haven Greenback.
An above-forecast rise to US jobless claims may have prevented major losses for the exchange rate, however. Initial jobless claims rose above forecasts to 241K. The data was likely seen by investors as signs of a cooling labour market and a heightened possibility of a US recession.
At time of writing the GBP/USD exchange rate is at around $1.1959, virtually unchanged from this morning’s opening figures.
Original article continues below:
Pound US Dollar (GBP/USD) Exchange Rate Falls amid Downbeat UK Outlook
The Pound US Dollar (GBP/USD) exchange rate is slipping today. A poor assessment of the UK government’s finances could be pushing the exchange rate lower. Additionally, continued bets on a 0.75% rate hike from the Federal Reserve may also be weighing on the currency pair.
At time of writing the GBP/USD exchange rate is at around $1.942, which is down roughly -0.2% from this morning’s opening figures.
Pound (GBP) Dips as UK Gov Borrowing Leaps Above Forecasts
The Pound (GBP) is slipping against its competitors today. A poor outlook for the UK economy is likely weighing on the currency today.
Figures released today indicated that the UK government’s finances may be in worse condition that predicted by the Office for Budget Responsibility (OBR). UK government borrowing rose above-forecasts to £22.9B in June due to soaring inflation.
Analysts were quick to point out the difficult position the figures place newly appointed UK Chancellor Nadhim Zahawi in.
PwC Economist Hoa Duong said:
‘While tax cuts could ease business cost pressure and encourage growth, this could push up inflation, exacerbating the current pay squeeze. At present this means a choice between focusing on managing the deficit or tackling the cost of living rises, but not both.’
The rise to inflation is also placing increased pressure on UK businesses amid soaring prices, potentially also denting confidence in the Pound. Political uncertainty in the country may also be keeping pressure on GBP today.
US Dollar (USD) Gains amid Fed Rate Hike Bets
The US Dollar (USD) is ticking higher against most of its rivals today. A risk-off impulse in the markets is helping the safe-haven ‘Greenback’ to firm amid increased global recession fears.
Expectations of a 0.75% interest rate hike from the Federal Reserve may also be supporting USD today. A Reuters poll of economists conducted this week found a majority agreeing on such a move.
Markets had been pricing in the possibility of a 1% rate hike after figures last week showed US inflation hitting 9.1% in June. The following days saw Fed policymakers attempt to reign in this expectations, however.
Gains for USD could be limited by fears of an imminent recession, however.
Speaking on the possibility, Senior US Economist Aditya Bhave from Bank of America Securities said:
‘There seems to be an inflation tax on the consumer and that continues to build up and take its toll and eventually pushes the economy into a mild recession.’
GBP/USD Exchange Rate Forecast: Will Retail Slump add to Poor UK Outlook?
Looking ahead to the rest of the week for Sterling, a forecast drop to retail sales figures for June could pull the currency lower on Friday. The impact of the figures could be minimal however with markets have largely priced in the Jubilee-related slump.
The Pound may continue to see gains limited by political uncertainty in the coming weeks as the Conservative leadership contest rumbles on.
Also on Friday, an expected downturn to private sector growth in both the US and UK could see both currencies slump if PMI figures print as forecast.
Expectations of central bank rate hikes may also help both USD and GBP to make gains in the coming days.