Pound US Dollar Exchange Rate Slumps as Investors Brace for Truss’s Energy Package
The Pound US Dollar (GBP/USD) exchange rate is falling this morning ahead of the unveiling of Liz Truss’s energy package.
At the time of writing the GBP/USD exchange rate is trading at around $1.1479, down roughly 0.3% from this morning’s opening rate.
Pound (GBP) Weakens ahead of Energy Crisis Package Announcement
The Pound (GBP) is on the back foot this morning as GBP investors await Truss’s energy package announcement.
Truss has promised to ‘deal hands on’ with the energy crisis in a parliament statement she gave earlier this week. The package, which will be revealed today, is designed to protect consumers and businesses from soaring energy prices.
It is hoped that package, which is currently estimated to cost around £130bn, will also help shore up economic growth as UK households will have more disposable income.
However, there are some investors that are worried that the package will be funded by higher borrowing rates and also impact inflation, which is already above 10%.
Without an intervention however, average energy prices are set to rise to an average of £3,549 a year from October.
If GBP investors are receptive to Truss’s energy package the Pound could climb. But if Truss’s plan falls short of expectations it’s likely the GBP/USD exchange rate could test new multi-year lows.
US Dollar (USD) Subdued ahead of Fed Powell Speech
The US Dollar (USD) might be up against the Pound, but it is trading sideways against most of its other peers this morning.
The sluggish trade is likely being caused by weaker bond yields and cautious investors ahead of Federal Reserve policymaker Jerome Powell’s speech this afternoon.
The Federal Reserve has been open about their desire to keep increasing interest rate in order to tame inflation.
Many investors are expecting a 75bps rate hike in the Federal Open Market Committees (FOMC) September’s meeting.
If Powell’s speech is hawkish, this will likely bolster USD as investors become more confident in a 75bps hike. This is the current expectation as recent Fed rhetoric has been broadly hawkish.
However, a more dovish tone could see the US Dollar stumble if it causes USD investors to rein in their expectations for the next hike.
Pound US Dollar Forecast: Risk off Mood to Underpin USD?
Looking ahead, the Pound US Dollar exchange rate could remain on the back foot through the remainder of today’s session if a risk-off mood continues to prevail.
Also potentially influencing USD exchange rates will be the publication of the latest US initial jobless claims. Will a rise in new claims last week limit the ‘Greenback’s upside potential. With no significant UK data being released today, the Pounds movement will likely continue to be driven by domestic headlines and Truss’s energy crisis package reveal.