Pound US Dollar (GBP/USD) Exchange Rate Fluctuates as Fed Remain Hawkish
(UPDATED 29/6/23, 08:45)
The Pound US Dollar (GBP/USD) exchange rate is struggling to regain lost ground after yesterday’s slump. Federal Reserve Chair Jerome Powell added fuel to the fire of rate hike bets when he announced that the majority of the Fed expect two or more hikes before the end of the year.
At time of writing, the GBP/USD exchange rate is around $1.2637, relatively unchanged from this morning’s opening levels.
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GBP/USD Exchange Rate Nosedives as Fed Promises Two More Hikes
(UPDATED 28/6/23, 16:45)
The Pound US Dollar exchange rate is plummeting in the wake of a hawkish speech from Fed Chair Jerome Powell. Speaking at the European Central Bank (ECB) Forum on Central Banking, Powell confirmed at least two more rate hikes. Citing a strong labour market and stubbornly high inflation, the US Dollar rallied on elevated rate hike expectations.
Meanwhile, an equally bullish talk from Bank of England (BoE) Governor Andrew Bailey failed to elicit a similar response from GBP investors. Fears of the central bank’s relentless tightening cycle pushing the UK into a recession saw Sterling tumble.
At time of writing, the GBP/USD exchange rate is around $1.2636, a whopping 0.86% fall from this morning’s opening levels.
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GBP/USDExchange Rate Softens as Fears Mount on Looming UK Recession
The Pound US Dollar exchange rate is slipping amid growing concerns that the UK is heading for a recession as sky-high inflation and soaring interest rates weigh heavy.
At time of writing, the GBP/USD exchange rate is around $1.2707, a 0.30% drop from this morning’s opening levels.
Pound (GBP) Under Pressure from Mounting Economic Woes
The Pound (GBP) is experiencing mixed success this morning amid a lack of economic data. Despite the BoE opting to deliver a hawkish and surprising 50bps rate hike last week, Sterling remains under pressure.
Fears of further tightening from the central bank is widely thought to tip the UK into a recession. With the cost-of-living crisis worsening, surging borrowing costs would only make matters worse. A further dampening of the economic outlook could deter GBP investors.
Meanwhile, talks of the UK government to take extra fiscal steps to control sky-high inflation could also be a double-edged sword. The measures include freezing corporate profits, as well as cutting wages in the public sector. However, in doing so, more pressure will be heaped upon households, exacerbating the living cost squeeze.
US Dollar (USD) Undermined by Upbeat Market Mood
Meanwhile, the US Dollar (USD) is also struggling for sustained demand amid improving market sentiment. Reports of China boosting their economy with further stimulus has seen risk appetite return, denting the safe-haven US Dollar.
Preventing further slides, however, is the recent printing of stronger-than-expected US data. Durable goods rose instead of an expected decline, the housing market is proving far more resilient, and consumer confidence hit its highest level since January 2022. Expectations of further tightening could be buoying the ‘Greenback’.
With the ECB Forum of Central Banking now entering its third day, focus will shift to key speeches later today. A panel involving key central banker bosses could inspire movement, with USD investors particularly focused on further clues as to how long the Fed intends to keep raising rates for.
Pound US Dollar Exchange Rate Forecast: Key Central Bank Speeches to Increase Volatility?
Looking ahead, the Pound US Dollar exchange rate could see further movement with speeches from both the Fed Chair Jerome Powell and BoE Governor Andrew Bailey. The focus will be on Bailey and his comments on the looming UK recession. GBP investors are keen to learn how the central bank intends to curb inflation as the consequences of higher interest rates are negatively impacting the economy.
As for the US Dollar, a recent string of strong data could see Powell turn hawkish and rate hike expectations increase, boosting the ‘Greenback’.