Pound US Dollar (GBP/USD) Exchange Rate Rises amid Upbeat Trade
The Pound US Dollar (GBP/USD) exchange rate is moving higher this morning, having hit a three-month low last night, as an optimistic mood among investors lifts the currency pairing.
At the time of writing, GBP/USD is trading at around $1.2439, up 0.25% on the day.
Pound (GBP) Firms as Sentiment Improves
Today the Pound (GBP) is managing to climb up from its lowest level against the US Dollar (USD) in over three months, after a bruising week for the UK currency.
Signs of a cooling labour market, paired with a larger-than-forecast contraction in the British economy in July, sparked recession fears and dampened bets on more Bank of England (BoE) interest rate rises. This saw GBP/USD slump to its lowest levels since late May.
Today, the increasingly risk-sensitive Pound is moving higher against the safe-haven ‘Greenback’ as an upbeat mood lifts Sterling.
Last night, new data from China – the world’s second-largest economy – beat forecasts. In August, Chinese industrial production and retail sales grew more than anticipated, while the unemployment rate unexpectedly dropped.
China has faced a stuttering economic recovery in recent months, worrying global investors. Last night’s positive data therefore cheered markets.
However, the UK’s domestic economic woes are keeping a firm lid on the Pound. GBP/USD remains down on the week.
US Dollar (USD) Cushioned by Rising Treasury Yields
The US Dollar, meanwhile, is struggling to attract support amid the upbeat mood. Investors are shunning the safe-haven currency in favour of riskier assets.
However, rising US Treasury yields are limiting USD’s losses. Government bond yields – which often indicate Federal Reserve rate hike expectations and correlate positively with the Dollar – have rallied over the past two days, approaching a 15-year high hit nearly one month ago.
This comes in the wake of stronger-than-expected US economic data, which markets saw as increasing the likelihood of more policy tightening from the Fed.
GBP/USD Exchange Rate Forecast: Unexpectedly Strong US Data to See USD Rebound?
Looking ahead, some US data releases this afternoon could impact the GBP/USD exchange rate.
First off are August’s industrial production figures. With growth expected to have slowed sharply last month, USD could face headwinds.
Likewise, the latest consumer sentiment index from the University of Michigan could dent the ‘Greenback’. Forecasters expect to see another decline in morale in September, as mixed factors play on the US economy.
However, recent US data releases have regularly surprised to the upside. If today’s reports follow the trend, the US Dollar could rise higher.
In the meantime, risk appetite could drive GBP/USD movement. If the market mood remains upbeat, the riskier Pound could continue to edge higher against the safer US Dollar.