Pound US Dollar Exchange Rate Rose in Anticipation of Truss Tackling Energy Crisis
The Pound US Dollar (GBP/USD) exchange rate has found support this morning as investors await Liz Truss’s plans to tackle the energy and cost-of-living crisis.
At the time of writing the GBP/USD exchange rate is trading at around $1.1562, which is up roughly 0.25% from this morning’s opening numbers.
Pound (GBP) Gains Support as Truss Expected to Unveil Emergency Energy Package
The Pound (GBP) is rallying this morning as Liz Truss, the new prime minister takes office today. The currency is strengthening as Truss is expected to unveil an emergency package to tackle the energy crisis, which has cheered GBP investors.
Multiple times throughout the morning the Pound has even hit $1.16 against the US Dollar (USD). A notable rebound from yesterday where the GBP/USD exchange rate hit its lowest point since March 2020.
There are many ways to approach the energy freeze, including energy suppliers taking out government-back loans to offset the cost of bills. Either way, Truss is expected to freeze energy bills prior to the price cap rising again in October.
GBP investors hope an energy price freeze could relieve some of the pressure on British households. Potentially supporting the UK economy through underpinning consumer spending.
US Dollar (USD) Subdued as Risk-On Mood Weighs on the ‘Greenback’
The US Dollar appears to be mixed this morning amid a prevailing risk-on mood.
The US ISM non-manufacturing PMI will print later this afternoon and will give a better picture of the US economy in August. Market forecasts predict last month’s figures will report a modest slowing of growth.
A fairly robust release could underpin the US Dollar as it is likely to bolster expectations for the next Federal Reserve rate hike.
The Fed has been vocal about the importance US data will play in their next interest rate decision. Current investor bets suggest that a 75bps raise in expected, which aligns with the hawkish rhetoric Fed policymakers are giving.
Nancy Vanden Houten, lead US economist at Oxford Economics told investors:
‘The modest slowdown in employment growth in August may be welcome by the Fed, but it won’t prevent further sizable rate hikes in the months ahead.’
Pound US Dollar Exchange Rate Forecast: GBP to be Driven by UK Politics?
Looking ahead, in the absence of any notable UK data, movement in the Pound US Dollar exchange rate is likely to driven primarily by domestic political developments.
Liz Truss’ first speech as Prime Minister will likely act as the primary catalyst of movement, with Sterling potentially strengthening if GBP investors a receptive to any comments regarding her economic policies.
Meanwhile, the US Dollar looks poised to rally if market sentiment begins to sour again in the face of global recession fears.