Pound US Dollar (GBP/USD) Exchange Rate Softens Ahead of UK’s Autumn Statement

Pound US Dollar (GBP/USD) Exchange Rate Muted as Markets Brace for Jeremy Hunt’s Fiscal Announcement

The Pound US Dollar (GBP/USD) exchange rate is weakening ahead of Chancellor Jeremy Hunt’s Autumn Statement.

At time of writing, the GBP/USD exchange rate is around $1.1881, a 0.29% drop from this morning’s opening levels.

Pound (GBP) Quiet Ahead of Hunt’s Autumn Statement

The Pound (GBP) remains relatively muted this morning as the market shifts its focus to the autumn statement. Chancellor Jeremy Hunt expects to present his autumn statement to parliament at midday.

Despite an expected return to fiscal responsibility after the disastrous mini-budget, the UK’s poor economic situation continues to deter investors. Hunt is expected to announce a swathe of spending cuts and tax hikes to balance the books. Set to be worth £60bn, Hunt hopes to plug the fiscal black hole left behind by the previous Chancellor and former Prime Minister. Ahead of the statement, Hunt warned of tough times ahead, adding:

‘Today we are having to take some difficult decisions to restore stability, bring inflation down and balance the nation’s books.

‘So this is our plan to build a stronger economy, protect public services and make sure we look after our most vulnerable.’

Weighing on the Pound, however, are the mounting concerns that the Office for Budget Responsibility (OBR) will release an increasingly bleak economic outlook for the UK. To accompany the autumn statement, the OBR will be releasing their latest economic forecasts. Expected to be in line with the Bank of England’s (BoE) gloomy forecasts, the OBR could lift investors spirits if optimism grows after the fiscal measures are announced.

Meanwhile, the BoE Governor Andrew Bailey testified before the UK Treasury Select Committee yesterday and said future rate hikes are to be expected. However, he also mentioned that they have been observing signs that supply chain shock was easing.

US Dollar (USD) Undermined by Pared Rate Hike Expectations

Meanwhile, the US Dollar is climbing modestly amid a cautious market mood. However, softening inflation and mixed data continue to weigh on the ‘Greenback’.

Lending support to the US Dollar are the ever-present geopolitical tensions, and how they continue to dominate global market sentiment. Despite somewhat easing after the missile attack that killed two in Poland now deemed an accident, the threat of an escalating conflict continues to lend modest support to the safe-haven US Dollar.

However, after mixed data released yesterday, and with inflation softening, investors have scaled back odds for another 75bps rate hike. The probability of a smaller 50bps interest rate raise now sits at 85%.

Pound US Dollar Exchange Rate Forecast: Autumn Forecast to Bolster Sterling?

Looking ahead, the Pound US Dollar exchange rate could see further volatility with the release of the autumn statement. GBP investors could be cheered by a return to fiscal responsibility, but a continually worsening cost-of-living crisis could sour moods.

Elsewhere, the US Dollar could see movement with speeches from Federal Reserve’s Philip Jefferson and Michelle Bowman. Any further hints at future monetary policy could influence USD investors.

Danny Tingle

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