Pound US Dollar (GBP/USD) Exchange Rate Soars Post Core PCE Data
(Article updated 16:18, 30/6/23)
The Pound US Dollar (GBP/USD) exchange rate is soaring this afternoon, following a cool down in the Federal Reserve’s preferred inflation gauge.
The yearly core PCE price index cooled to 4.6% in May, suggesting that further tightening may not be as vital as first thought. Because of this, the US Dollar (USD) declined against most peers, with the market mood turning jubilant.
As the Pound (GBP) holds an increasingly risk-sensitive nature, this bullish trade propelled it against most peers, despite a lack of data drivers.
At the time of writing, GBP/USD is trading at around US$1.2719, a rise of just over 0.8% from the morning’s opening rates.
Original article continues below:
Pound US Dollar Exchange Rate Firms as Investors Await Core PCE Price Index
The Pound US Dollar exchange rate is ticking higher this morning, as investors await the latest US core PCE price index.
At the time of writing, GBP/USD is trading at around US$1.2638, rising by roughly 0.2% from the morning’s opening rates.
US Dollar (USD) Calm Ahead of Core PCE Data
The US Dollar (USD) is seeing calm trade this morning, as investors anticipate this afternoon’s core PCE price index.
As the Federal Reserve’s preferred gauge of inflation, this release is likely to set the next interest rate decision in motion.
Economists forecast that the monthly reading will print at 0.3%, while the yearly gauge is forecast to hold at 4.7%.
If the data hits forecasts, USD should strengthen over the session, as it would set the stage for additional tightening. Furthermore, yesterday’s fall in jobless claims and significantly higher GDP revision, suggest capacity for further hikes.
Chris Turner, Global Head of Markets and Regional Head of Research for UK & CEE at ING, commented:
‘May’s core PCE deflator is expected at a firm 0.3-0.4% MoM, consistent with the Fed’s view that core inflation is not falling quickly enough. That should keep US rates and the dollar firm.’
Pound (GBP) Buoyed as UK Dodges Winter Recession
Meanwhile, the Pound (GBP) is being kept afloat this morning by confirmation that the UK economy managed to swerve a recession.
Earlier, the Office of National Statistics (ONS) reported that the UK’s final Q1 GDP figures showed an expansion of 0.1%, in line with previous readings.
While bringing some cheer to investors, the lack of significant deviation is potentially causing Sterling to remain muted against its peers. Furthermore, discussions of the UK’s economic outlook remain bleak.
Thomas Pugh, Economist at RSM UK, commented:
‘We currently think the economy flatlined in Q2 and then will grow by around 0.2% q/q in Q3 and Q4 but further rises in interest rates could easily push that into the negative. In any case, the big picture is that the economy could be no larger in 2024 than it was pre-pandemic.’
Elsewhere, the lack of significant data releases could be serving to temper Sterling’s appeal during today’s session.
GBP/USD Exchange Rate Forecast: US Manufacturing PMI to Dent USD?
Looking ahead to early next week for the US Dollar, Monday brings the publication of the latest ISM manufacturing PMI.
Reflecting June’s activity in the sector, economists are forecast an uptick from 46.9 to 47.2. However, as this is set to remain in contractionary territory, it may bring little cheer to USD investors.
Elsewhere, market sentiment could shape the ‘Greenback’. As a safe-haven currency, a shift to risk-averse trade could prompt the US Dollar to climb against riskier assets.
For the Pound, the data calendar is relatively thin on the ground at the start of next week. However, the final manufacturing PMI reading is due on Monday.
If June’s reading changes in a meaningful way, GBP rates are likely to follow suit. A surprise to the upside could bring cheer to GBP investors.