Pound US Dollar (GBP/USD) Exchange Rate Drops as US Core PCE Increases
Article updated 16:10, 31/08/2023:
The Pound US Dollar (GBP/USD) exchange rate is falling this afternoon, following confirmation of an increase in the US core PCE price index.
As the Federal Reserve’s preferred gauge of inflation, confirmation of an increase likely brought about further rate hike bets.
Furthermore, jobless claims unexpectedly fell which likely brought further strength to the ‘Greenback’. With signs of tightness in the jobs market, the Fed may have more room to tighten as they aim to drive inflation down.
At the time of writing, GBP/USD is trading around US$1.2667, falling by just under 0.4% from the morning’s opening rates.
Original article continues below:
Pound US Dollar (GBP/USD) Exchange Rate Narrows amid Signs of BoE Pause
The Pound US Dollar (GBP/USD) exchange rate is trapped in narrow boundaries this morning, following a dovish speech from Bank of England (BoE) Chief Economist Huw Pill.
At the time of writing, GBP/USD is trading at around US$1.2695, showing little movement from the morning’s opening rates.
Pound (GBP) Struggles Following Dovish BoE Pill Speech
The Pound (GBP) is struggling to attract support this morning, following an uninspiring speech from Bank of England Chief Economist Huw Pill.
While Pill did assert that the BoE were to remain steadfast in the fight against inflation, he implied that a pause may be imminent.
Pill stated:
‘At present, the emphasis is still on ensuring that we are – in the words of the MPC’s last statement – sufficiently restrictive for sufficiently long to ensure that we have that lasting return to target. Now that policy is in restrictive territory, there is the possibility of doing too much and inflicting unnecessary damage on employment and growth.’
Recently, the Pound has benefitted from perceptions of a divergence between the central banks. With this speech, however, the BoE seem to be on the cusp of pausing their current tightening cycle.
This view is being compounded by a survey from Lloyds Bank, which found that business confidence was improving. Businesses were seeming more optimistic, and explicitly cited the potential that interest rates had finally reached a peak.
US Dollar (USD) Quiet Ahead of Core PCE Data
The US Dollar (USD) is trading quietly this morning, as attention shifts towards the afternoon’s core PCE price index.
As the Federal Reserve’s preferred gauge of inflation, forecasts of an increase in July to 4.2% could bring strength to USD.
However, even an increase may do little to fully inspire USD investors. Recent data indicated growing slack in the US jobs market, which may suggest that the Fed would be better pausing.
Elsewhere, a mixed market mood could be lending safe-haven flows to the ‘Greenback’ this morning.
Pound US Dollar Exchange Rate Forecast: US NFP Drop to Dent USD?
Looking ahead for the US Dollar, tomorrow sees the release of the latest non farm payrolls data, capping a week of key labour data.
If this shows that the number of created jobs fell in August, as forecast, the ‘Greenback’ could weaken. This would likely be taken as proof that the jobs market is loosening, leading to pared back hike bets.
This is followed by the latest ISM manufacturing PMI. Economists anticipate a modest improvement in August’s activity, which could serve to cushion USD against significant weakness.
For the Pound, data releases are in short supply through to the end of the week’s session. With this in mind, Sterling is likely to be left vulnerable to shifts in risk appetite. Bullish trade could bring a boon for Sterling.