Pound US Dollar (GBP/USD) Exchange Rate Wavers as Markets Brace for Interest Rate Decisions
The Pound US Dollar (GBP/USD) exchange rate is struggling for a clear direction this morning as the US PPI inflation data remains a key indicator for next week’s policy meeting.
At time of writing, the GBP/USD exchange rate is around $1.2242, relatively unchanged from this morning’s opening levels.
US Dollar (USD) Subdued Ahead of Crucial PPI Data Release
Meanwhile, the US Dollar is remaining fairly quiet as investors await the release of November’s producer price index inflation. The ‘Greenback’ is also finding it difficult to muster up strength amid falling US Treasury bond yields.
Federal Reserve policymakers will be looking at this afternoon’s PPI data for any last-minute influences on next week’s CPI update. With consumer inflation showing signs of cooling, investors will be looking to see if producer prices followed suit. If PPI falls lower than expected, interest rate expectations could be slashed, potentially pulling the ‘Greenback’ down. However, an expected unchanged 0.2% MoM figure could keep rate hike expectations on course for a 50bps rise.
Pound (GBP) Quiet as Public Inflation Expectations Soften
The Pound (GBP) remains on the back foot to end the week as a lack of major data left Sterling exposed to market sentiment and domestic issues. The only data of worth this morning was the release of the Bank of England’s (BoE) public inflation expectations for the following year.
The quarterly survey conducted by the central bank showed that the public’s expectations for inflation softened somewhat for the coming year. However, medium-term inflation expectations edged up from last month. The mixed reaction won’t really provide much impetus for policymakers ahead of next week’s key policy meeting.
Meanwhile, Chancellor Jeremy Hunt is set to announce sweeping reforms to the financial sector. As outlined in his autumn statement, Hunt says his plans will ensure London will benefit from ‘dynamic, proportionate regulation’. Despite originally put in place to protect the UK from another financial crisis in the wake of 2008, a potential rollback of regulations could concern investors.
Pound US Dollar Exchange Rate Forecast: PPI Inflation to Spur Fed Rate Hike Expectations?
Looking ahead, the Pound US Dollar exchange rate could see some increased movement with the release of US PPI data. Elsewhere, the Michigan consumer sentiment survey could inspire the US Dollar. An expected slight improvement could provide a modest boost to the ‘Greenback’.
Meanwhile, the Pound will be left exposed to domestic woes and market sentiment heading into the weekend. However, a flurry of key economic indicators next week could see Sterling fluctuate. The release of GDP growth kicks off next week’s session, and an expected modest growth could spur the Pound.