Pound US Dollar (GBP/USD) Exchange Rate Remains Narrow amid Dour GDP Release
(Article updated 16:20, 27/4/23) The Pound US Dollar (GBP/USD) exchange rate is remaining narrow this afternoon, following the US’ latest set of GDP data.
Over the first quarter, the US economy grew by 1.1% on a quarterly basis, versus expectations of 2% growth. The initial reading of this could be limiting the US Dollar, as it shows that the US economy is slowing down sharply. This slowdown may be caused by the Federal Reserve’s tightening.
However, the accompanying PCE data pointed to an increase in inflationary pressures. This in tandem sparked additional rate hike bets. Because of this, the ‘Greenback’ is being underpinned as we move into the American session.
At the time of writing, GBP/USD is trading at around US$2485, showing little movement from the morning’s opening rates.
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Pound US Dollar Exchange Rate Rangebound as Investors Await US GDP Data
The Pound US Dollar exchange rate is trading narrowly this morning, as investors await the afternoon’s US GDP data.
At the time of writing, GBP/USD is trading at around US$1.2473, showing little movement from the morning’s opening rates.
US Dollar (USD) Quiet as Investors Await GDP Release
The US Dollar (USD) is trading quietly this morning, as investors await the afternoon’s GDP data release.
American GDP is forecast to have grown by 2% over the first quarter. While possibly reflecting an economy still in a healthy state, economists forecast this to be a slowdown of 0.6% from the previous quarter.
If this prints accurately, it could weigh on the ‘Greenback’ as we move through today’s session. It would indicate that the US economy is slowing, likely leading to pared back rate hike bets.
Fresh concerns over the US banking sector could be limiting USD this morning, too. In a matter of weeks, First Republic has seen its share prices crash by roughly 95% of their value.
James Knightley, Chief International Economist at ING, commented:
‘After the most aggressive monetary policy tightening cycle in 40 years, cracks are starting to form. The housing market is deteriorating, business sentiment is in recession territory, and recent banking stresses mean lending conditions will tighten considerably.’
These jitters could be affecting bets on further tightening from the Federal Reserve, which may be muting USD.
Pound (GBP) Lacks Direction amid Thin Data Calendar
The Pound (GBP) is trading without clear direction this morning, as a lack of data limits Sterling’s appeal to investors.
As such, GBP is likely vulnerable to shifts in the market mood. Currently, the mood is mixed at best – leaving Sterling unable to gain ground against riskier or safer assets.
However, bets on an additional rate hike from the Bank of England (BoE) may be cushioning Sterling from further losses.
Markets and investors are highly confident that the meeting in May will bring an additional 25bps rate hike. However, the path forward appears less clear, and is likely to be data driven.
GBP/USD Exchange Rate Forecast: Core PCE Index in Focus
Looking ahead for the US Dollar, tomorrow’s core PCE price index data is likely to provide direction for the ‘Greenback’.
As the Federal Reserve’s preferred inflationary tracker, March’s forecast of a dip to 4.5% may weaken USD. However, as this is a 0.1% drop from 4.6% in February it may show that inflation is stickier than hoped.
With this in mind, USD could rally as investors bet on further tightening from the Federal Reserve, as they move to cut down inflation.
For the Pound, data releases are relatively thin on the ground through to the week’s close. Because of this, Sterling is likely to trade on market dynamics and the relative strengths of other currencies.
For instance, if the aforementioned PCE index prints as expected, GBP could weaken as investors flock to USD.