Pound US Dollar (GBP/USD) Exchange Rate Remains Flat as Market Mood Improves
Article updated 16:15, 19/9/23:
The Pound US Dollar (GBP/USD) exchange rate is remaining trapped in narrow boundaries this afternoon, as the market mood improves.
However, due to the continued absence of wider data drivers, Sterling has been unable to press its advantage.
Similarly, as investors have begun to shift focus towards the Federal Reserve’s imminent interest rate decision, the ‘Greenback’ has endured muted trade.
At the time of writing, GBP/USD is trading at around US%1.2399, showing little movement from the morning’s opening rates.
Original article continues below:
Pound US Dollar (GBP/USD) Exchange Rate Narrows Ahead of Central Bank Decisions
The Pound US Dollar (GBP/USD) exchange rate is rangebound this morning, as investors shift focus to upcoming central bank decisions.
At the time of writing, GBP/USD is trading at around US%1.2387, showing little movement from the morning’s opening rates.
Pound (GBP) Quiet amid Light Data Calendar
The Pound (GBP) is trading flatly today against most peers, amid a lack of data releases. With the increasingly risk-sensitive Sterling left exposed to the market mood, the bearish atmosphere is likely capping any gains.
As such, investors are likely looking ahead to the Bank of England’s (BoE) imminent interest rate decision. While markets anticipate a 25bps hike, the question of additional hikes remains muddled.
Recent data has pointed to cooling inflation within the UK which, when taken alongside dovish communications from the BoE, has prompted reduced rate hike bets.
Francesco Pesole, FX Strategist at ING, commented:
‘Our base case remains a rate hike, although the upside for Sterling would entirely depend on whether the BoE will convince markets they can do more (a similar situation to last week’s ECB meeting) since the Sonia curve prices in 38 bps of tightening in total.’
US Dollar (USD) Holds Fast Ahead of Fed Decision
The US Dollar (USD) appears to be in a consolidatory mood this morning, as investors look ahead to tomorrow’s main event.
Then, the Federal Reserve is due to announce its latest interest rate decision. Markets have grown increasingly split over the possible decision, but the consensus remains of a pause. However, there is a firm chance that the Fed will leave the door open to future rate hikes.
Ultimately, the ‘Greenback’ is lacking firm support ahead of the decision. This is, in part, due to a short supply of significant data catalysts.
Furthermore, it seems that hawkish guidance is expected, as explained by Francesco Pesole, FX strategist at ING:
‘It appears markets are happy to hold on to recently built dollar longs ahead of tomorrow’s FOMC, which suggests expectations are generally for a hawkish hold.’
Pound US Dollar Exchange Rate Forecast: UK Inflation Data in Focus
Tomorrow, the Pound is likely to see fresh volatility after the release of the latest consumer price index data.
Economists forecast an uptick in headline CPI, which could prompt a knee-jerk upswing for GBP. However, this is likely to be offset by a fall in core inflation, which is expected to cool from 6.98% to 6.8%.
As the more important measure to the Bank of England, this data is like to be the focus for investors. Because of this, Sterling could weaken as investors pare back bets on further interest rate hikes.
For the US Dollar, the fallout from the Fed’s latest interest rate decision is likely to be the main driver of movement. If the Fed took a hawkish stance, USD could continue to climb in the short term.
However, a shift towards bullish trade could weaken the safe-haven currency as investors look towards riskier assets.