Pound US Dollar (GBP/USD) Exchange Rate Narrows amid Recovering Market Mood
(Article updated 17:00 6/6/23) The Pound US Dollar (GBP/USD) is narrowing this afternoon, as an upbeat market mood weighs on the safe-haven ‘Greenback’.
The CME’s FedWatch tool now indicates an 80% possibility of a hold at the Federal Reserve’s June meeting, which is serving to spark optimistic trade.
Due to the scale of the US economy, less hikes would be less damaging for the global economic outlook.
At the time of writing, GBP/USD is trading at around US$1.2417, showing little movement from the morning’s opening rates.
Original article continues below:
Pound US Dollar Exchange Rate Softens amid Repricing
The Pound US Dollar exchange rate is softening this morning, as GBP investors continue to reprice Sterling.
At the time of writing, GBP/USD is trading at around US$1.2408, a drop of just over 0.2% from today’s morning rates.
Pound (GBP) Weakens amid Retail Sales Slump
The Pound (GBP) is weakening this morning, following news that retail sales volumes have slumped to a seven-month low.
Earlier, the British Retail Consortium (BRC) published their measure of retail sales growth for May. This printed at 3.7%, falling from 5.2% on a yearly basis. As such, Sterling could be weakening due to this downbeat news.
Helen Dickinson OBE, the Chief Executive of the BRC, commented:
‘With consumer confidence still recovering from record depths, and continued tightening of household incomes, we are unlikely to see substantial sales growth in the coming months. But, with signs that inflation has possibly peaked, retailers are hopeful that confidence will continue to improve.’
However, a lack of pertinent data elsewhere may be further weighing on Sterling, despite the trace of optimism.
This may be diminishing sentiment toward Sterling as investors look for safer investments, due to GBP’s increasingly risk-sensitive nature.
Furthermore, investors are likely continuing to adjust GBP’s price, following from last week’s sharp rallies post inflation jump.
US Dollar (USD) Muted amid Persistent Recessionary Narrative
The US Dollar (USD) appears unable to capitalise on a cautious market mood this morning, following on from yesterday’s downbeat data.
The latest US service index printed below forecasts at 50.3. While the sector avoided contraction, it painted a worrisome picture of the US economy when viewed alongside recent declines in manufacturing.
As such, the continued recessionary narrative is likely weighing on the ‘Greenback’. Chris Turner, Global Head of Markets and Regional Head of Research for UK & CEE at ING, commented:
‘However, the US data calendar is now pretty quiet for the rest of this week and the market may well hold positions into next week’s May CPI data and the June 14th FOMC meeting.’
Further limiting USD may be reduced Federal Reserve rate hike bets. On the back of the sobering data, US Treasury yields receded, which are usually a strong indicator of rate hike bets.
GBP/USD Forecast: Initial Jobless Claims to Buoy USD?
Looking ahead for the US Dollar, the core catalyst of movement may come from this afternoon’s economic optimism index.
This is forecast to increase, which may provide a boon for the ‘Greenback’ by indicating burgeoning optimism amongst US businesses.
Elsewhere, Thursday’s initial jobless claims release could provide further impetus. These are forecast by economists to edge higher, but remain within their usual bounds. If true, this may reiterate views of continual tightness in the US labour market.
Because of this, USD could strengthen as it may indicate room for further rate hikes from the Federal Reserve.
Meanwhile, the Pound may continue to trade in a limited direction due to a lack of impactful data releases in the short term.