Pound US Dollar (GBP/USD) Exchange Rate Climbed on Uplift in Market Sentiment
The Pound US Dollar (GBP/USD) exchange rate is soaring closer to the weekly high as a risk-on impulse thanks to China’s stimulus package undermines safe-haven currencies.
At time of writing, the GBP/USD exchange rate is around $1.1864, a 0.48% climb from this morning’s opening levels.
US Dollar (USD) Struggling for Demand amid Risk-On Impulse
The US Dollar slumped as an improving global market sentiment sapped demand for safe-haven currencies.
Global market sentiment has significantly improved in the wake of China announcing an economic support package, a 19-point policy plan, worth 1 trillion Yuan (£123bn). The stimulus will include fiscal support for property, energy, infrastructure, and agriculture, to shore up its shaky economy. Worth almost 1% of China’s GDP, the huge boost is hoping to steady the rocky Chinese economy that has been hampered by surging Covid cases and a property market crisis.
Further weighing on the ‘Greenback’ was the stalling of durable goods orders, ending a four-month streak of growth. Compounding downbeat PMI data, fears of a slowing US economy could sap demand for the US Dollar as rate hike expectations could cool.
However, lending some moderate support to the US Dollar is still the growing expectations of a bumper 75bps rate hike at the next policy meeting. With the Jackson Hole symposium due to start today, investors remain cautious ahead of the crucial Federal Reserve speech. The probability of a 75bps rise sits at 60%, up from 40% a week ago.
Pound (GBP) Firms Despite Mounting Domestic Woes
The Pound (GBP) is seeing mixed success today against its main rivals as multiple headwinds continue to exert downward pressure on Sterling.
Despite mounting expectations of another half-point interest rate hike, a faltering UK economy is failing to provide much confidence in investors. Surging energy prices and the ongoing ‘summer of discontent’ is likely to keep a lid on any significant gains the Pound could make.
As energy prices are set to skyrocket by almost 80% in the winter, calls for further fiscal support from the government is being demanded. The British Chambers of Commerce (BCC) are pushing for ‘Covid-style’ support for small firms with a five-point plan to ensure businesses can survive the energy price surges. Shevaun Haviland, Director General of BCC, said:
‘Good business is good for our communities, and we must support firms and the individuals that run them to ride out this economic storm.
‘In June, we gave the government until the autumn budget to get its house in order, but the latest economic projections released since then have been worse than expected. We simply cannot afford to see another month of the same old news.’
Pound US Dollar Exchange Rate Forecast: US Jobs Data to Boost the US Dollar?
Looking ahead, all eyes will be on the Jackson Hole symposium which kicks off later in the session with Federal Reserve Chair Jerome Powell to set the tone of the Fed’s monetary policy going forward. A hawkish rhetoric could bolster the ‘Greenback’.
Meanwhile, data remains thin on the ground for Sterling with just the CBI retail survey to provide an unofficial indication of retail sales for August. Persistent domestic headwinds are likely to influence the Pound further.