Pound US Dollar Exchange Rate Drops as Truss’s Premiership in Question
The Pound US Dollar (GBP/USD) exchange rate is weakening this morning, after trading higher yesterday in response to Chancellor Jeremy Hunt’s emergency statement.
At the time of writing the GBP/USD exchange rate is trading at around $1.1274, which is roughly down 0.6% from this morning’s opening rate.
Pound (GBP) Stumbles amid Doubts over Truss’s Future
The Pound (GBP) is on the backfoot this morning as politicians, economists and markets are questioning Liz Truss’s ability to lead the UK government.
With Hunt moving in and scrapping two-thirds of the unfunded fiscal plan, many are left feeling that the market turmoil caused over the last month has been for nothing.
Confidence in Truss has plummeted in days, following her dismissal of former Chancellor Kwasi Kwarteng and her side lining as new Chancellor Jeremy Hunt, scrapped the majority of their poorly received mini budget.
The PM has apologised for the mini-budget, but observers suggest this may be too little too late. With many within her party openly questioning her future.
In an interview with BBC political editor Chris Mason, Truss said:
‘I do want to accept responsibility and say sorry, for the mistakes that have been made. I wanted to act but to help people with their energy bills to deal with the issue of high taxes, but we went too far and too fast. I’ve acknowledged that. I put in place a new chancellor with a new strategy to restore economic stability.’
If there are any signs that Tory MPs many be moving to oust Truss its likely this could stoke volatility in the Pound.
US Dollar (USD) Sluggish as Upbeat Market Mood Prevails
The US Dollar (USD) is also struggling to find support this morning as risk appetite continues to hinder the safe-haven ‘Greenback’.
This risk-on mood follows the overhaling of the UK government’s fiscal policies. Investors were concerned about the financial crash that the mini budget could cause and the impact this could have on global markets.
Despite the upbeat market mood this morning, the US Dollar’s losses are potentially being limited by interest rate bets. The next Federal Reserve rate hike is currently being priced in at 75bps.
Pound US Dollar Forecast: GBP to be Driven by Inflation Data?
Looking ahead, the Pound US Dollar could see significant movement as the UK releases its inflation data tomorrow.
Headline inflation is forecast to increase from 9.9% to 10%. If true, the Pound could face major headwinds tomorrow. However, if inflation levels stay the same or decrease, Sterling could be bolstered.
In the meantime, the Pound will remain susceptible to political uncertainty within the Conservative Party as Liz Truss struggles to remain in power.
Turning to the US, ahead of data this afternoon, USD could continue to trade on risk appetite.