Pound US Dollar (GBP/USD) Exchange Rate Drops amid Souring Market Mood
Article updated 16:15, 8/8/2023:
The Pound US Dollar (GBP/USD) exchange rate is dropping this afternoon, as safe-haven flows propel the US Dollar (USD) against its peers.
As an increasingly risk-sensitive currency, the Pound (GBP) usually trades at the behest of these market shifts, weakening as the mood drops. Furthermore, the safe-haven status of the US Dollar is propelling it against riskier assets.
However, the ‘Greenback’s gains may be being limited somewhat by this afternoon’s speeches from Federal Reserve officials. Despite coming from notably hawkish officials, both speeches reiterated that the Fed was firmly in data-driven mode.
At the time of writing, GBP/USD exchange rate is trading at around US$1.2720, falling by just under half a percentage point from the morning’s opening rates.
Original article continues below:
Pound US Dollar Exchange Rate Stumbles amid Downbeat Market Mood
The Pound US Dollar exchange rate is struggling this morning, as a sour market mood weighs on the pairing.
At the time of writing, GBP/USD is trading at around US$1.2734, a fall of just under 0.4% from today’s morning rates.
Pound (GBP) Struggles amid Downbeat Market Mood
The Pound (GBP) is lacking support this morning, as a lack of data releases leaves Sterling vulnerable to shifts in risk appetite.
The market mood is degrading this morning, following the latest Chinese trade data. Exports were found to have fallen faster than expected, contracting by 14.5%. As the world’s largest economy shows signs of stumbling, the global economic outlook has begun to seem a little darker.
Furthermore, the UK retail sector was found to have struggled over July, as consumers contend with dismal weather and elevated interest rates.
The British Retail Consortium (BRC) found that an increasing number of retailers were relying on promotional offers to garner footfall. Furthermore, consumers seem to be shifting towards cautious shopping as the cost-of-living crisis rolls on.
Paul Martin, Head of Retail at KPMG, commented:
‘UK consumers have been hugely resilient throughout the cost of living crisis but stubbornly high inflation coupled with rapidly rising interest rates will test their ability and willingness to keep on spending for the rest of this year.’
US Dollar (USD) Firms amid Souring Market Mood
The US Dollar (USD) is firming this morning, as the sour market mood lends support to the safe-haven currency.
While little in the way of impactful data is due before Thursday, investors appear to be in a cautious mode. The inflation data will likely provide insight into further actions from the Federal Reserve, and could imply further rate hikes.
Additionally, markets are likely remaining coy ahead of a duo of Fed speeches this afternoon. With notably hawkish members due to speak, the ‘Greenback’ could see fresh volatility.
Francesco Pesole, at ING, commented:
‘It will be interesting to hear what FOMC members Patrick Harker and Thomas Barkin say about the economy in two separate speeches today, especially following last week’s slightly weaker-than-expected headline payroll figures.’
However, these gains may be limited as a further hike has yet to be fully priced in. Markets are unconvinced that the recent labour data is enough to push the Fed into additional tightening.
GBP/USD Exchange Rate Forecast: CPI Uptick to Boost USD?
Looking ahead for the US Dollar, the latest consumer price index data is due on Thursday, likely providing fresh impetus.
For July, headline CPI is forecast to increase from 3% to 3.3%, while core inflation is forecast to hold at 4.8%. If this prints as expected, USD may rally as this could spark bets on further Fed rate hikes.
For the Pound, risk appetite is likely to be the core catalyst of movement, owing to minimal data. As an increasingly risk-sensitive currency, a shift to bullish trade could strengthen GBP over the ‘Greenback’.