Pound US Dollar (GBP/USD) Exchange Rate Languishes Near Six-Month Low
The Pound US Dollar (GBP/USD) exchange rate attempted to recover from its recent lows today as an improving market mood dampens the safe-haven ‘Greenback’. However, worries about the UK economy are keeping Sterling muted.
At the time of writing, the GBP/USD exchange rate is trading at $1.2148, having previously hit a low of $1.2135.
Pound (GBP) Remains Subdued amid Bleak UK Outlook
The Pound (GBP) is attempting to recover this morning, with the increasingly risk-sensitive currency supported by an upbeat market mood.
However, the recent pressures piling on the Pound are severely capping the upside.
Worrying economic data and gloomy forecasts from financial firms, such as accountancy giant KPMG and ratings agency S&P Global Ratings, are fuelling fears that the British economy faces long-term headwinds.
The bleak outlook is also reinforcing expectations that the Bank of England (BoE) is done raising interest rates, after the bank paused its tightening cycle last week.
These factors are continuing to weigh on GBP today, stifling Sterling’s upside potential.
US Dollar (USD) Softens as Risk Appetite Improves
Meanwhile, the safe-haven US Dollar (USD) is easing from recent highs today as the improving appetite for risk dampens the currency’s appeal.
Markets have been thoroughly downbeat recently, with worries about China’s indebted property sector, higher interest rates, and a possible US federal shutdown all driving a flight to safety.
The US House of Representatives has been deadlocked over funding plans, fuelling fears that funding for federal agencies could run out on 30 September.
However, last night the Senate approved a stopgap measure that would ensure government funding would remain in place until 17 November, thus averting a US federal shutdown.
Markets are breathing a sigh of relief this morning, which in turn is denting demand for the safe-haven US Dollar. Yet with plenty of other threats to the global economy persisting, risk appetite is limited.
GBP/USD Exchange Rate Forecast: US Durable Goods Orders to Dent USD?
Looking ahead, the latest American durable goods orders data is out this afternoon.
After July’s shockingly large 5.2% slump in orders, economists are expecting a more modest decline of 0.5%. If the data prints as expected, signs that the US economy is facing some turbulence could dent the US Dollar.
In the meantime, risk appetite could drive most movement. If the current bullish market mood persists, Sterling could crawl higher.
Tomorrow then brings the final GDP reading for the US economy in the second quarter. Confirmation that the American economy remains robust could lift the ‘Greenback’. However, barring any deviation from preliminary estimates, the data could have only a limited impact.