Pound US Dollar (GBP/USD) Exchange Rate Remains Low Post Powell Testimony
(Article updated 14:07, 21/6/23) The Pound US Dollar (GBP/USD) exchange rate is remaining low this afternoon, following the release of Federal Reserve Chair Jerome Powell’s testimony.
In his testimony to the US Senate, Fed Chair Powell outlined that the bank would take a data driven, meeting-by-meeting approach. While less hawkish than USD investors may have hoped, Powell indicated that a future resumption was possible – that the Fed was just on pause.
He stated:
‘Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year. But at last week’s meeting, considering how far and how fast we have moved, we judged it prudent to hold the target range steady to allow the Committee to assess additional information and its implications for monetary policy.’
At the time of writing, GBP/USD is trading at around US$1.2724, still down by over 0.3% from this morning’s rates.
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Pound US Dollar Exchange Rate Dives despite Core Inflation Increase
(Article updated 09:06, 21/6/23) The Pound US Dollar exchange rate is falling this morning, despite a red-hot core inflation print the UK.
This could be prompted by yesterday’s bets on a terminal rate of 6% – markets are likely cognizant of the damage this could cause to the UK economy.
With core inflation printing at 7.1%, a shock jump from 6.8%, a 50bps hike tomorrow is being consistent. However, due to the mercurial nature of the Bank of England (BoE), investors may be wary of making firm bets.
As such, this is leaving Sterling downbeat thus far. However, this could shift as we move through the session and markets digest the surprise jump.
At the time of writing, GBP/USD is trading at around US$1.2726, down just over 0.3% from the morning’s opening rates.
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Pound US Dollar Exchange Rate Falls as Market Mood Sours
(Article updated 16:11, 20/6/23) The Pound US Dollar exchange rate is falling further this afternoon, as a souring market mood weighs on Sterling.
As an increasingly risk-sensitive currency, GBP tends to struggle for support during these downbeat sessions. Furthermore, USD’s nature as a safe-haven currency is likely driving support.
Elsewhere, upbeat news in the US housing market could be serving to weigh on the pairing. New starts posted a dramatic recovery, which could have brought some cheer to USD investors.
At the time of writing, GBP/USD is trading at around US$1.2744, a drop of just over 0.4% from the morning’s opening rates.
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Pound US Dollar Exchange Rate Wavers amid Quiet Market Mood
The Pound US Dollar exchange rate is trapped in narrow bounds this morning, as a wary market mood weighs on Sterling.
At the time of writing GBP/USD is trading at around US$1.2782, showing little movement from the morning’s opening rates.
Pound (GBP) Propped Up by Continued Rate Hike Bets
The Pound (GBP) is being kept afloat by continued interest rate hike bets this morning, ahead of this week’s inflation data.
However, owing to a cautious market mood, Sterling appears unable to fully capitalise on these bets. While the Bank of England (BoE) are set to unveil their latest interest rate decision on Thursday, markets appear wary of increased bets.
As such, Sterling is in something of a defensive phase this morning, potentially prompted by upheaval in the UK housing market.
Mortgages have come under pressure recently, as two-year Gilt yields skyrocketed over 5% yesterday.
Chris Turner, Global Head of Markets and Regional Head of Research for UK & CEE at ING, explains:
‘The UK 2-10 year Gilt curve is now the most inverted since 2000. It’s true that a heavily inverted Gilt curve makes it more expensive for foreigners to hedge UK Gilt holdings – i.e. a sterling positive – but this heavily inverted curve will be heaping a lot of pressure on the UK economy.’
US Dollar (USD) Muted amid Tetchy Market Mood
The US Dollar (USD) is seeing muted trade this morning, as the nervous market mood appears to do little for the safe-haven currency.
However, optimism around US Secretary of State Antony Blinken’s visit to China may be providing some support.
Blinken and Chinese President Xi Jinping agreed to stabilise Sino-American relations, in order to prevent conflict between the superpowers. However, the road to progress isn’t as clear cut.
Blinken stated:
‘But progress is hard. It takes time. And it’s not the product of one visit, one trip, one conversation. My hope and expectation is: we will have better communications, better engagement going forward’
Elsewhere, a lack of impactful data releases could be leaving USD to trade on market dynamics. Following an underwhelming rate cut from the People’s Bank of China (PBoC), markets appear to be quiet this morning.
GBP/USD Exchange Rate Forecast: UK Inflation in Focus
Tomorrow, the Pound’s core catalyst of movement is likely to be the latest UK inflation data. Headline inflation is forecast by economists to cool to 8.4%.
However, this is likely to be offset by core inflation data – which is forecast to stay at 6.8%. If these forecasts are accurate, it would likely set the stage for Thursday’s interest rate decision, and boost Sterling rates.
For the US Dollar, Fed Chair Jerome Powell is due to begin his testimony to the US Senate tomorrow. Powell is expected to explain the current monetary policy, and provide the Fed’s justification.
Investors will likely keep a close eye on his testimony. Any hawkish rhetoric, or direct hints at a resumption of tightening, could strengthen the ‘Greenback’.