Pound US Dollar Exchange Rate Rises amid Upbeat Market Sentiment
The Pound US Dollar (GBP/USD) exchange rate is on the rise today as an improving market mood swing saps the appeal of the safe-haven ‘Greenback’.
At the time of writing the GBP/EUR exchange rate is trading at around $1.2475. Up roughly 0.5% from this morning’s opening rate.
US Dollar (USD) Facing Losses as Market Mood Switches to Risk-On
The US Dollar (USD) is faces selling pressure today as demand for the currency is undermined by a prevailing risk-on mood.
Market sentiment has recovered significantly from yesterday after worries over the US banking sector spooked investors. As the concerns were sparked by a 50% plunge in First Republic Bank’s share price after it reported it lost $102bn in the first quarter.
The banking scare has sapped Federal Reserve interest rate hike expectations. CME’s Fedwatch Tool, currently sees the odds of a 25bps rate from the Fed next month at 75.8%, down from 90% at the start of this week. The fall likely contributing to the weakness of the US Dollar.
Pound (GBP) Sees Retail Growth amid Borrowing High
The Pound (GBP) is being supported by speculation the Bank of England (BoE) will raise interest rates next month.
GBP investors are highly confident in a May rate hike following last week’s UK inflation data. With markets seemingly shrugging off comments made by BoE Deputy Governor Ben Broadbent yesterday, in which he suggested inflation is set to fall sharply in the coming months.
The Confederation of British Industry (CBI) distributive trades for April were also released today, showing stronger-than-expected growth in retail sales.
While this is helping to support the Pound, analysts warn April’s uptick in retail activity can be attributed to temporary factors, and that consumer spending may remain weak despite a recovery in incomes in the third quarter.
Gabriella Dickens, Senior UK economist at Pantheon Macroeconomics comments:
‘The boost from the hike to benefits, however, will prove to be temporary, given that the real value will decline again over the coming months as prices continue to rise.
‘Households’ real disposable incomes will hold broadly steady in Q2, before a recovery takes hold in Q3, supported by a drop back in energy prices. What’s more, households’ real spending likely will recover more slowly than incomes, given that consumers’ confidence still is weak’
Pound US Dollar Exchange Rate Forecast: US Data to Drive GBP/USD Gains?
Looking ahead to tomorrow, the Pound US Dollar (GBP/USD) exchange rate could be supported by US Q1 GDP data.
The US Dollar, however, might be carried by the US GDP data released tomorrow. The current risk-on mood could limit the Dollar’s success for the rest of today’s session if US durable goods orders meet forecasts.
The lack of data on the Pound throughout the remainder of the week could see BoE rate hike speculation continue to drive Sterling sentiment. If investors remain confident in a May rate hike, the Pound may strengthen.