Pound US Dollar (GBP/USD) Exchange Rate Regains Lost Ground after US PCE Figures
(Updated 16:39 31/03/23)
The Pound US Dollar (GBP/USD) exchange rate trimmed some of its losses over the course of Friday before settling within a narrow range. Cooler US inflation figures may have prompted the mild recovery in the pairing.
The latest reading of the US core PCE price index indicated an easing in US inflation. February’s figures decline to 0.3%, a greater fall than the 0.4% drop forecast. This prompted fresh speculation of a slower pace of policy tightening from the Federal Reserve, which could have pushed GBP/USD higher this afternoon.
Despite the easing in inflation pressures, some analysts felt that inflation was still high enough to justify an additional rate hike from the Fed. This may have capped any gains for the pairing today.
Sal Guatieri, a senior economist at BMO Capital Markets, said:
‘For the Fed, it could be one and done in May.’
At time of writing the GBP/USD exchange rate is at around $1.2369, which is virtually unchanged from this morning’s opening figures.
Original article below:
Pound US Dollar (GBP/USD) Exchange Rate Wobbles amid Risk Appetite Retreat
The Pound US Dollar exchange rate is losing ground today. A slight retreat in global risk appetite may be weighing on the pairing.
On the other hand, GBP/USD may be being underpinned by an upward revision in fourth quarter UK GDP.
At time of writing the GBP/USD exchange rate is at around $1.2357, which is down roughly 0.2% from this morning’s opening figures.
Pound (GBP) Subdued despite Evidence UK Avoided 2022 Recession
The Pound (GBP) is seeing muted movements today. Sterling is slipping against the US Dollar however, with a risk-off impulse potentially prompting the losses.
GBP may be seeing any losses limited by optimistic GDP data this morning. The final reading of fourth quarter GDP figures was revised higher to indicate a 0.1% expansion in the UK’s economy. The figures mean that the UK economy narrowly avoided a recession in 2022.
The figures seem to be having little positive effect on Sterling though. This may be down to the overall poor outlook for the UK economy despite the upward revision.
The Pound may also be finding support from market hopes that the Bank of England (BoE) will continue to raise interest rates in the coming months.
US Dollar (USD) Boosted by Fed Bets
The US Dollar (USD) is rising today ahead of key inflation data this afternoon. The safe-haven ‘Greenback’ may be benefitting from a risk-off impulse in the markets.
Mixed messages from the US Federal Reserve may be keeping USD’s gains limited today. Markets are beginning to increase bets on a May rate hike from the Fed, however.
Francesco Pesole and Frantisek Taborsky of ING said:
‘We are once again observing dollar weakness in tandem with a repricing higher in Fed rate expectations – a May hike is now 60% priced in – and evidence of improving liquidity conditions among US banks.’
Some recent hawkish comments from Fed policymakers are also giving weight to increased rate hike bets. This may be boosting USD.
GBP/USD Exchange Rate Forecast: Will Cooler PCE Weigh on USD?
The Pound will see very little significant data in the coming week. The final reading of March’s private sector PMIs on Monday and Wednesday could affect Sterling.
The final reading of the UK’s dominant services sector PMI could have the most pronounced effect on GBP on Wednesday. The sector’s output is expected to have remained in positive territory in March.
For the US Dollar today, the latest reading of the core PCE price index could see USD tumble if it prints as forecast. The Fed’s preferred measure of inflation is expected to have cooled in February. The figures could also add to expectations of a slower pace of policy tightening from the Fed.
USD could continue to slip at the beginning of next week if manufacturing output remains in negative territory. March’s manufacturing PMI is forecast to print at 47.1 on Monday.
On the other hand, an expected positive reading for the US services sector on Wednesday could lend support to the US Dollar.
Signs of a still-tight labour market over the course of next week could further bolster USD if the data prints as expected. Whilst March’s non farm payrolls are expected to cool on Friday, the data has often beat forecasts to climb.
Additionally on Friday, unemployment is set to remain at 3.6% in March. The rate would only be marginally up from the 50-year low of 3.4%.