Pound US Dollar (GBP/USD) Exchange Rate Trims Gains as USD Holds Strong
(Updated 16:00, 9/9/22) The Pound US Dollar (GBP/USD) exchange rate relinquished earlier gains today amid renewed strength in the US Dollar (USD).
The Pound (GBP) had initially climbed to a nine-day high as a risk-on mood sapped demand for the safe-haven ‘Greenback’.
However, the Pound US Dollar pair seemingly rose to overbought levels. With the US economy looking relatively strong and more aggressive action from the Federal Reserve expected, USD recouped some losses against Pound Sterling.
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Pound US Dollar (GBP/USD) Exchange Rate Firms as Sentiment Improves
The Pound US Dollar (GBP/USD) exchange rate strengthened this morning as an upbeat market mood weighed on the safe-haven US Dollar (USD) and supported the riskier Pound (GBP).
At the time of writing, the GBP/USD exchange rate is trading at $1.1638, having briefly touched a nine-day high just shy of $1.1644.
US Dollar (USD) Declines amid Upbeat Market Mood
The US Dollar is falling across the board today as a rallying market mood saps demand for the safe-haven currency.
The US Dollar index – which measures USD’s performance against a basket of international currencies – has fallen sharply to a fresh monthly low.
Asian equity markets were up overnight, with the bullish tone continuing into European trade. At the time of writing, the FTSE 100 and European STOXX 600 are up 1.64% and 1.42%, respectively.
Amid this risk-on mood, traders are ditching the safe-haven Dollar in favour of riskier assets.
Pound (GBP) Buoyed by Energy Spending Plans
Meanwhile, the Pound is enjoying some support following Liz Truss’s energy support package announcement yesterday.
Commentators in the UK hope that plans to cap energy bills for households and businesses could reduce the severity of an expected recession.
Truss’s plans were broadly welcomed, although there is some concern over the cost, estimated at £130bn to £200bn. The government did not give details on how much the package would cost and how the Treasury would fund it, causing anxiety among some GBP investors.
Nevertheless, relief that the government will support people and the economy through the current energy crisis seems to have lifted Sterling.
GBP/USD Exchange Rate Forecast: Fed Speeches to Boost USD?
As the day unfolds, risk sentiment could continue to drive the pair. If the market mood remains upbeat, GBP/USD may be able to make additional gains.
However, investor sentiment could sour. Yesterday, the European Central Bank (ECB) slashed growth forecasts for the Eurozone, raising fears of a Eurozone recession. Meanwhile, Federal Reserve Chair Jerome Powell hinted at further interest rate rises, which markets fear could weigh on the global economy.
If these ongoing fears start to worry traders later today, a souring mood could see GBP/USD trim its gains.
Later this afternoon, a trio of Fed speeches could also impact the currency pair. If the three Fed officials signal more hawkish action from the US central bank, the ‘Greenback’ could climb.