Pound US Dollar (GBP/USD) Exchange Rate Rebounds as US Consumer Confidence Drops
(Updated 16:00, 17/3/23) The Pound US Dollar (GBP/USD) exchange rate initially slipped this morning but has managed to bounce back, recouping earlier losses.
The rebound in the Pound (GBP) came without a clear catalyst, as Sterling managed to strengthen against many of its peers despite a lack of fundamental factors driving the movement.
Later in the afternoon, the US Dollar (USD) faced some selling pressure in response to the latest consumer confidence figures. March’s preliminary report from the University of Michigan showed a drop from a score of 67 to 63.4, rather than holding steady at 67. This downbeat data weighed on USD.
At the time of writing, GBP/USD is trading at around $1.2148, an impressive 1% gain since markets opened on Sunday evening GMT.
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Pound US Dollar (GBP/USD) Exchange Rate Slips despite Risk-On Mood
The Pound US Dollar (GBP/USD) exchange rate has trimmed recent gains this morning, despite a risk-on mood, as markets begin to price in a pause from the Bank of England (BoE) at its meeting next week.
At the time of writing, GBP/USD is trading at $1.2131, having dropped more than half a cent from this morning’s high just shy of $1.2169.
Pound (GBP) Sheds Gains amid Declining BoE Bets
The Pound (GBP) had strengthened against the US Dollar (USD) overnight but this morning it pared its gains.
Amid the current banking sector crisis, markets have begun to scale back bets for further action from the Bank of England.
Adding to this, the bank’s latest quarterly survey results showed a decline in public inflation expectations. This, pared with worries about the impact of higher rates on financial stability, could convince policymakers to pause the hiking cycle at the bank’s meeting next week.
US Dollar (USD) Pressured amid Risk-On Mood
Meanwhile, the US Dollar (USD) is struggling to press the advantage today as a risk-on market mood dampens the appeal of the safe-haven currency.
The upbeat tone comes as fears of instability in the global financial system ease as central banks take action to shore up struggling banks.
In the US, the Federal Reserve has lent banks $300bn this week to stabilise the sector following the collapse of three American banks. Meanwhile, a group of large US banks joined together to put $30bn into First Republic to prop it up amid tumbling shares.
Across the pond, shares in the bank Credit Suisse – which had cratered by 30% earlier in the week – jumped after the Swiss National Bank lent it CHf50bn (£44bn) for ‘precautionary liquidity’.
Today markets are more upbeat that the emergency action from central banks will prevent the crisis from spiralling.
However, underlying jitters still remain. Despite the rescue packages, the financial sector seems fragile. This may be limiting the downward pressure on USD.
GBP/USD Exchange Rate Forecast: US Consumer Sentiment in Focus
Looking ahead, the latest US consumer sentiment report from the University of Michigan is out this afternoon. Economists expect the score to hold steady at its highest level since January 2022.
Such a result could lend USD some support, while an above-expected reading would likely lift the ‘Greenback’. However, if the score unexpectedly declines, the US Dollar could face renewed selling pressure.
In the meantime, risk appetite could continue to drive movement. While the markets have calmed as the recent turmoil in the banking sector abates, there are still some concerns. Any further signs of financial instability could spook investors, thereby supporting the safer US Dollar over the riskier Pound. Conversely, if markets continue to stabilise, GBP/USD could strengthen.