Pound US Dollar Exchange Rate Fluctuates as Investors Await Consumer Sentiment
The Pound US Dollar (GBP/USD) exchange rate is trading narrowly this morning after striking a 15-month high amid softer-than-expected US inflation data.
At time of writing the GBP/USD exchange rate is trading around $1.3109, relatively unchanged from this morning’s opening levels.
US Dollar (USD) Undermined by Slashed Rate Hike Bets
The US Dollar (USD) appears to be stabilising after its drastic selloff yesterday. Disappointing inflation data showed both headline and producer price inflation cooling further than expected, interest rate hike bets were slashed. Demand for the safe-haven ‘Greenback’ waned considerably
With producer price inflation only rising 0.1% in June, following weaker-than-expected headline inflation, global market sentiment soared. The safe-haven US Dollar was left licking its wounds as it tumbled to a 15-month low against the Pound. Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock, commented on the situation:
‘(The June report is the) first of what we anticipate will become a trend toward closer-to-target levels of inflation. We should see these types of numbers over the coming months ahead across domestic inflation prints.’
With the markets still expecting a 25bps hike from the Federal Reserve, the July raise could be the last. With the Fed set to enter their blackout period before the next policy meeting on the 26th, the next few days could be crucial in officials influencing those expectations.
Pound (GBP) Quiet amid Data Drought
Meanwhile, the Pound (GBP) is remaining fairly muted this morning amid a lack of economic data. A busy week has seen Sterling soar to a 15-month high against the US Dollar. A better-than-expected GDP contraction was bolstered by slashed Fed rate hike bets.
However, with no data until next week, GBP investors could be becoming concerned with the state of the UK economy. Despite an upbeat mood after GDP growth proved better than expected, the economy still contracted and points to further uncertainty going forward.
Elsewhere, industrial action looks to be picking up as it was announced that Gatwick airport will face eight days of strikes in pay disputes. With another summer of discontent heating up, further hits to the economy could weigh on Sterling. Ongoing economic uncertainty could see the Pound lose momentum as fears of a looming recession return.
Pound US Dollar Forecast: Improving Consumer Sentiment to Boost USD?
Looking ahead, the Pound US Dollar exchange rate could see further movement with the latest University of Michigan consumer sentiment survey. The figure is expected to climb beyond June’s four-month high figure as general confidence is predicted to improve again.
As for the Pound, a wavering market sentiment and concerns over the fragility over the UK economy could see Sterling slump.