Pound US Dollar (GBP/USD) Exchange Rate Makes Modest Gains as Risk Appetite Improves
(Updated 16:30, 25/07/23) The Pound US Dollar (GBP/USD) exchange rate wavered through today’s session, with the Pound (GBP) eventually gaining ground as upbeat UK data and a risk-on market mood aided the currency.
The latest releases from the Confederation of British Industry (CBI) exceeded forecasts, with UK firms expecting an uptick in output over the coming months.
The July CBI Industrial Trends Survey found that output volumes were flat in the quarter to July, ending five consecutive rolling months of decline. Firms expect output to expand in the next three months. #ITS pic.twitter.com/vwrpj5noTY
— CBI Economics (@CBI_Economics) July 25, 2023
Furthermore, the CBI’s business confidence index moved into positive territory for the first time since the fourth quarter of 2021.
Meanwhile, a risk-on market mood lent the Pound support against the safe-haven US Dollar (USD).
However, GBP/USD was initially unable to make any notable gains as USD attracted support despite the bullish tone.
Later in the session, however, stronger-than-forecast US consumer confidence further cheered global markets. This helped Sterling move higher.
At the time of writing, GBP/USD is trading at around $1.2862, up around 0.3% on the day.
Original article continues below:
Pound US Dollar (GBP/USD) Exchange Rate Finds Modest Gains as Risk Appetite Improves
The Pound US Dollar (GBP/USD) exchange rate is inching higher today as positive UK data and an upbeat market mood provide Sterling with support. However, the upside looks limited.
At the time of writing, GBP/USD is trading at around $1.2845, up marginally on the day.
Pound (GBP) Propped Up by CBI Data
The Pound (GBP) is fairly muted today as GBP investors remain sheepish following recent UK data releases.
Sterling suffered a selloff last week after the UK’s latest consumer price index printed below expectations, shattering bets on another 50bps interest rate hike from the Bank of England (BoE).
Yesterday brought further headwinds for GBP following the July PMI surveys. Both the services and manufacturing prints missed forecasts, with private sector activity in the UK almost stalling altogether.
The surveys also showed that inflationary pressures in the country are continuing to ease, further dampening BoE bets.
These factors put pressure on the Pound as today’s trade got underway, although an upbeat market mood initially helped the increasingly risk-sensitive currency inch higher against the safe-haven US Dollar (USD).
After a little wobble, Sterling found renewed support following better-than-forecast data from the Confederation of British Industry (CBI). Industrial trends orders improved from -15 to -9, beating forecasts of -12. Meanwhile, the business optimism index for the third quarter rose from -2 to 6, versus the expected score of 5.
This upbeat data for the UK prevented further losses for GBP.
US Dollar (USD) Subdued amid Risk-On Mood
Meanwhile, the US Dollar was initially struggling to find support as the bullish market mood dampened demand for the safer currency.
Recently, hopes of more economic stimulus measures from China’s government have cheered markets, with Beijing pledging more state support to aid the country’s stuttering economic recovery. As China is the second-largest economy in the world, this optimism has spilled over into global markets.
Nevertheless, fears of ongoing interest rate rises are capping the market mood, with the Federal Reserve policy decision looming.
The Fed meets tomorrow to set rates, with an expected 25bps hike putting a lid on risk appetite.
Yet this is also putting a dampener on the US Dollar, as investors are hesitant ahead of the decision.
GBP/USD Exchange Rate Forecast: Improving Consumer Morale to Boost the US Dollar?
Looking ahead, the latest US consumer confidence reading this afternoon could impact the Pound US Dollar pairing. Economists expect household morale in America to have improved this month, which could provide the ‘Greenback’ with support.
However, USD movement may be limited, with investors reluctant to reposition ahead of the Federal Reserve interest rate decision tomorrow night.
In the interim, risk appetite could drive most movement in the currency pairing. A prevailing bullish market mood could keep the more risk-sensitive Pound afloat against the safe-haven US Dollar. If sentiment sours, GBP/USD could begin to face headwinds.