Pound US Dollar (GBP/USD) Exchange Rate Strengthens on Further Tightening from BoE
(Updated 16:30, 4/4/23)
The Pound US Dollar (GBP/USD) exchange rate continues to climb against its peers this afternoon after Bank of England (BoE) Chief Economist Huw Pill talked of further rate hikes to tame inflation. Speaking this afternoon, Pill added:
‘The onus remains on ensuring enough monetary tightening is delivered to see the job through. There is a lot of policy-in-the-pipeline still to come through. (However), caution is still needed in assessing inflation prospects on account of the potential persistence of domestically generated inflation.’
Sterling holds its strength against a flagging US Dollar. At time of writing, the GBP/USD exchange rate is around $1.2494, a 0.60% climb from this morning’s opening levels.
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Pound US Dollar Exchange Rate Firms as US Manufacturing Contracts Further
The Pound US Dollar exchange rate is strengthening as downbeat US economic data saps demand for the ‘Greenback’, exacerbating recession fears.
At time of writing, the GBP/USD exchange rate is around $1.2505, a 0.69% climb from this morning’s opening levels.
US Dollar (USD) Undermined by Mounting Recession Fears
The US Dollar is struggling for demand today despite a cautious market mood, in the wake of disappointing manufacturing data.
Yesterday, the ISM manufacturing PMI fell to 46.3 in March, the lowest level since May 2020. Marking the fifth straight month of contracting factory activity, the pressures of soaring interest rates and relentless inflationary pressures weighed heavily. Chris Low, Chief Economist at FHN Financial, explains the overall impact the manufacturing sector has on the US economy:
‘Manufacturing is pulling back, but the service sector was still chugging along in February. As long as it remains well above 50 when reported on Wednesday, the broad economy should be just fine. Nevertheless, the health of manufacturing is related to the health of the overall economy.’
The US Dollar Index, compared against a basket of currencies, stays at its lowest level in over two months as USD investor await the next flurry of economic data. With factory orders also expected to fall, mounting fears of a recession could limit the appeal of the ‘Greenback’. Expectations of the Federal Reserve to pause their aggressive interest rate hiking cycle could grow if data continues to disappoint.
Pound (GBP) Supported by Upbeat Market Moods
The Pound (GBP) is enjoying relative strength against many of its peers this morning despite a lack of major economic data. An improving market mood, and especially against a weakening US Dollar, is buoying Sterling.
With central bank speeches planned for the afternoon, and with such a divergence in stances, GBP could fluctuate. BoE Chief Economist Huw Pill could speak on the recent developments in the banking sector and could hint towards the central bank’s monetary policy going forward.
On the other hand, the more dovish BoE policymaker Silvana Tenreyro could temper rate hike bets. Any comments of the downside pressures for growth and inflation, the Pound could slide.
Pound US Dollar Exchange Rate Forecast: JOLTs Jobs Data to Boost the Greenback?
Looking ahead, the Pound US Dollar exchange rate could see further movement with the latest employment data from JOLTs. An expected third consecutive drop in job openings could highlight a cooling labour market, paring rate hike bets.
Meanwhile, speeches from Bank of England (BoE) policymakers could influence Sterling. Chief Economist for the BoE Huw Pill is scheduled to speak later this afternoon. Any hints of the central bank’s continuing battle on inflation could spur the Pound on increased rate hike bets.