Pound US Dollar (GBP/USD) Exchange Rate Fluctuates on Deteriorating Global Growth Outlook
The Pound US Dollar (GBP/USD) exchange rate is trading erratically as investors turn cautious ahead of the Jackson Hole symposium, where the Federal Reserve is expected to continue its hawkish rhetoric.
At time of writing, the GBP/USD exchange rate is around $1.1822, relatively unchanged from this morning’s opening levels.
US Dollar (USD) Remains Cautious Ahead of Jackson Hole Symposium
The US Dollar is failing to find much strength against its peers today as investors turn cautious ahead of the annual central bank meeting in Wyoming. In the wake of mixed data, the Fed will be faced with a tough dilemma. Against a backdrop of waning global market sentiment, a slowdown of rate hike pacing could weigh on the ‘Greenback’.
Yesterday saw the release of worse-than-expected PMI data, piling pressure on the ‘Greenback’. US business activity fell to a 27-month low, with the services sector badly missing forecasts and dropped to 44.1. The slowdown in the services sector was the sharpest decline since May 2020 as customer spending contracted amid inflationary pressures. Elsewhere, manufacturing fell to 51.3 versus an expected 52, highlighting the slowest growth since July 2020.
If the Fed feels the economy isn’t as resilient as previously thought, a slowdown in rate hikes could happen. All eyes will be on the Jackson Hole symposium tomorrow as Fed Chair Jerome Powell is due to speak. A continued hawkish stance on monetary policy could buoy the ‘Greenback’.
Pound (GBP) Wavers amid Plans to Cap Energy Prices
The Pound (GBP) is struggling to find a clear direction today as the cost-of-living crisis is set to worsen in the winter as the energy price cap is set to soar by 80%.
Keith Anderson, Chief Executive of Scottish Power, has proposed a fiscal support package for UK households which would cost £100bn. With living costs set to soar in the winter, Anderson suggests capping household energy bills at £2000 a year. This would be substantially lower than the expected 80% rise that will come into play in October, with the cap soaring to £3550.
The unprecedented rise in bills could plunge millions of households into poverty, and many analysts fearing UK inflation could be driven up as high as 18% next year. Conservative leadership candidate Rishi Sunak has warned that borrowing vast sums of money to alleviate the cost-of-living crisis is risky. Speaking on Radio 4’s Today Programme, Sunak said:
‘We need to make sure that what we’re doing is not only affordable, but also isn’t going to make inflation worse.
‘At a time when we’re already borrowing an enormous amount of money, I think embarking on policies and programmes that add not just tens of billions, but tens and tens and tens of billions of pounds on a permanent basis to our borrowing are risky.’
Pound US Dollar Exchange Rate Forecast: Manufacturing and Housing Sectors to Show Resilient US Economy?
A flurry of US data isn’t likely to sway investors too much ahead of the Jackson Hole Symposium starting tomorrow. However, durable goods orders and pending home sales will show the current strength of the manufacturing and housing sectors. Further interest rates can be expected if data shows the resilience of the US economy.
Elsewhere, data remains thin on the ground for the rest of the week for the Pound. The myriad of domestic woes are likely to weigh on Sterling.