Pound US Dollar (GBP/USD) Exchange Rate Skyrockets on Slashed Fed Rate Hike Bets
(Updated 13/7/23, 14:30)
The Pound US Dollar (GBP/USD) exchange rate is strengthening even further in the wake of softer-than-expected PPI inflation. With price pressures easing cross the United States, a sign that inflation is finally easing have tempered rate hike bets. Against expectations of 0.2% YoY increase, June’s figure eased to 0.1%, all but confirming the July hike from the Federal Reserve will be the last.
Economists at ABN Armo Bank are confident that June’s disinflation will not derail a hike in July, but added:
‘While the Fed will welcome further disinflationary progress, the June CPI report is unlikely to prevent the FOMC from hiking by another 25bp, given the stickiness in labour-intensive services inflation and the broader resilience in other macro indicators in the US.
‘However, the report gives us greater conviction that July will be the last hike of the current cycle, with a September hike looking unlikely assuming current data trends persist.’
At time of writing, the GBP/USD exchange rate is still around $1.3093, a 0.74% jump from this morning’s opening levels.
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Pound US Dollar (GBP/USD) Exchange Rate Fluctuates amid Buoyant Market Mood
(Updated 13/7/23, 09:00)
The Pound US Dollar exchange rate is wavering this morning in the wake of yesterday’s USD selloff. With softer-than-expected inflation data, hopes were raised of a peak in Federal Reserve interest rates drawing nearer. A buoyant market mood is keeping the ‘Greenback’ under sustained pressure.
At time of writing, the GBP/USD exchange rate is still around $1.30, relatively unchanged from this morning’s opening levels.
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GBP/USD Exchange Rate Climbs on Slashed Fed Rate Hike Bets
(Updated 12/7/23, 16:30)
The Pound US Dollar exchange rate is strengthening after US inflation cooled further than expected, sapping demand for the US Dollar on tempered rate hike bets. With headline CPI falling to 3% from 4%, the belief that the Federal Reserve could pause its tightening cycle after the July meeting is sapping demand for the ‘Greenback’.
At time of writing, the GBP/USD exchange rate is around $1.30, an almost 0.5% jump from this morning’s opening levels.
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Pound US Dollar Exchange Rate Fluctuates as US Inflation Cools to 3%
(Updated 12/7/23, 14:00)
The Pound US Dollar exchange rate is trading narrowly in the wake of the latest US inflation data. Against expectations of cooling to 3.1%, headline CPI eased to 3%, the lowest level since March 2021. Core inflation, stripping out volatile prices of food and energy, fell to 4.8%, compared to predictions of a climb to 5%. Softer-than-expected inflation could see rate hike expectations from the Federal Reserve tempered, which could drag the ‘Greenback’ down.
At time of writing, the GBP/USD exchange rate is around $1.2948, relatively unchanged from this morning’s opening levels.
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GBP/USD Exchange Rate Wavers as Risk Appetite Grows
The Pound US Dollar exchange rate is rangebound this morning as US inflation is set to hit lowest level in two years.
At time of writing, the GBP/USD exchange rate is around $1.2932, relatively unchanged from this morning’s opening levels.
US Dollar (USD) Quiet amid Improving Market Mood
The US Dollar (USD) remains quiet this morning as the market braces for the latest inflation data for the US. Expectations that headline CPI will slow to 3.1% from 4%, the figure edges closer to the Federal Reserve’s target level of 2%. With hopes growing of the Fed to pause their tightening cycle after the next meeting, market sentiment is improving.
However, core inflation, stripping out volatile prices such as food and energy, is expected to have fallen much more modestly. Against predictions of slowing to 5.1% from 5.3%, the stickiness will remain a concern for the central bank. With elevated inflationary pressures lingering, further tightening could be needed. Coupled with the labour market remaining so tight, expectations of further tightening could be boosting the US Dollar.
Economists at Credit Suisse are warning that if inflation data surprises again, the ‘Greenback’ could plummet. A stronger-than-expected fall in inflation could see the Fed once again pause their tightening cycle after the July meeting. They said:
‘A number that can be termed ‘weak’ would allow the market to toy with the idea of pricing in no further hikes after this month. Compared to the roughly 40% chance of a further 25 bps after this month’s hike now priced in.’
Pound (GBP) Supported by Bumper Rate Hike Expectations
Meanwhile, the Pound (GBP) is relatively subdued this morning amid a lack of economic data. Providing modest support, however, are expectations that the Bank of England (BoE) could continue raising the interest rates.
The BoE released the latest Financial Stability Report this morning. Governor Andrew Bailey gave a press conference reassuring the markets that the UK’s banking system is strong enough to weather an economic storm. Despite soaring interest rates causing stress to consumers and firms, Bailey reassured investors the UK economy is resilient.
Pound US Dollar Exchange Rate Forecast: Shrinking UK Economy to Weigh on Sterling?
Aside from US inflation data, the Pound US Dollar exchange rate could see movement with the latest UK GDP growth data. The latest report due tomorrow is predicted to show that the UK economy is expected to shrink 0.3% in May.
As for the US Dollar, the latest PPI data could see the ‘Greenback’ climb if forecasts prove true. An expected uptick in producer prices could indicate inflationary pressures have not peaked, which could see the case for further rate hikes from the Fed, bolstering the US Dollar.