Pound US Dollar (GBP/USD) Exchange Rate Craters as Trade Remains Depressed
(Article updated 16:24, 25/4/23) The Pound US Dollar (GBP/USD) exchange rate is continuing to fall this afternoon, as the market mood remains downbeat.
The risk averse market mood is likely allowing USD investors to ‘buy-the-dip’, following recent weakness in the ‘Greenback’. A fall in US consumer sentiment could have prompted the bearish trade, by illustrating weakening consumer appetite.
Furthermore, rising tensions in the US over the debt ceiling could have contributed to the downbeat mood. With no clear solution on the horizon, the US edges closer to defaulting on it’s national debt, which could have dire consequences for the global economy.
At the time of writing, GBP/USD is trading at around US$1.2408, a fall of roughly 0.7% from the morning’s opening rates.
Original article continues below:
Pound US Dollar Exchange Rate Dips amid Souring Market Mood
The Pound US Dollar exchange rate is weakening this morning, as a cautious market mood gives the edge to USD.
At the time of writing, GBP/USD is trading at around US$1.2471, a decline of around 0.2% from the morning’s opening rates.
US Dollar (USD) Buoyed amid Cautious Market Mood
The US Dollar (USD) is enjoying modest support this morning, as cautious trade colours the session. With impactful data releases due later in the week, investors appear to be wary of investing in riskier assets.
Federal Reserve interest rate hike bets are likely adding a tailwind to USD this morning as well. Investors expect that the Fed will push ahead with a 25bps rate hike at the next meeting, as they move to ensure inflation falls.
However, as further tightening could have a detrimental effect on the US economy, this may be creating fears over the global economy. As the world’s largest economy, if that collapses, it could severely impact others.
With the Fed in a blackout period ahead of their latest interest rate decision, the lack of clarity may be levelling out USD.
Pound (GBP) Muted despite Lower-Than-Forecast Government Borrowing
The Pound (GBP) is seeing muted trade today, although the latest public sector borrowing data could be providing some tailwinds for Sterling. The Office for National Statistics (ONS) found that the UK government borrowed less than expected over 2022-23 financial year.
Borrowing was estimated to have totalled £139.2bn, far below forecasts of £152bn. As such, investors could be hopeful that Chancellor Jeremy Hunt Will have more fiscal room to manoeuvre.
Ruth Gregory, Deputy Chief UK Economist at Capital Economics, states:
‘With the next election fast approaching we wouldn’t be at all surprised to see a further fiscal loosening in the Autumn Statement.’
However, with a cautious market mood throughout the market, the increasingly risk-sensitive Pound is unable to capitalise on this data.
Furthermore, mixed data releases from the Confederation of British Industry (CBI) could be further muting Sterling. Industrial trends orders for April printed in line with forecasts at -20, while business optimism for Q2 increased to -2 from -5.
GBP/USD Exchange Rate Forecast: Durable Goods Recovery to Boost USD?
Looking ahead for the US Dollar, tomorrow brings the release of the latest durable goods orders data for March. With the cost of order received by manufactures forecast to recover over the month, USD could strengthen.
Then, Thursday sees the release of the latest GDP data. Reflecting Q1’s activity, the US economy is forecast to have grown by 2%. This could cheer USD investors but may prompt upbeat trade across the market, which would weigh on the ‘Greenback’.
For the Pound, tomorrow’s distributive trades data could provide some direction. With this retail sector health check, the forecast of a fall to 0 from 1 could prompt weakness in GBP.