Pound US Dollar (GBP/USD) Exchange Rate Slips amid UK Economy Concerns
(Updated 16:35, 13/10/23) The Pound US Dollar (GBP/USD) exchange rate fell during the course of today’s session as fresh worries about the UK economy weighed on Sterling.
A new report showed that UK company insolvencies rose by 17% year-on-year last month, with more businesses going bust as higher interest rates and weakening demand hammer revenue.
In addition, the British Chancellor of the Exchequer, Jeremy Hunt, warned of challenges ahead.
Speaking to reporters at the International Monetary Fund (IMF) and World Banking annual meeting in Morocco, Hunt commented:
‘The financial picture that I face is worse than in the Spring, and that means that I will have to take difficult decisions to make sure that in the face of what’s happening in Ukraine, in Israel, in parts of Africa, we are resilient.’
His remarks highlight the precariousness of the UK economy, and hint that there is unlikely to be good news in his Autumn Statement next month.
With the outlook seeming to cloud over once again, the Pound (GBP) faced selling pressure.
Meanwhile, the safe-haven US Dollar (USD) enjoyed a risk-off market mood as the crisis unfolding in Israel and Gaza continues to deteriorate.
New data showing that US consumer inflation expectations rose this month added to USD’s upside, by boosting bets on more Federal Reserve interest rate hikes.
At the time of writing, GBP/USD is trading at $1.2135, down 0.3% on the day.
Original article continues below:
Pound US Dollar (GBP/USD) Exchange Rate Recovery Limited amid Lack of Data
The Pound US Dollar (GBP/USD) exchange rate is edging higher this morning as the ‘Greenback’ surrenders some of yesterday’s gains. However, Sterling remains weak.
At the time of writing, GBP/USD is trading at $1.2214, having recovered around 0.3% from its overnight lows.
US Dollar (USD) Trims Post-Inflation Gains
The US Dollar (USD) is trimming its gains this morning, with the currency seemingly having entered overbought conditions following yesterday’s impressive rally.
The ‘Greenback’ jumped on Thursday after US inflation exceeded forecasts, holding steady at 3.7% in September and indicating that price pressures are proving stickier than expected. This in turn boosted bets on another Federal Reserve interest rate hike by the end of the year.
In response, the US Dollar surged over 1% against the Pound (GBP), but today the currency is trimming its gains. Even a risk-off mood is failing to help the safe-haven ‘Greenback’ climb higher.
It seems as though markets are correcting after the post-inflation buying spree.
Pound (GBP) Edges Higher amid BoE Bets
Meanwhile, the Pound has seen choppy trade so far this morning amid a volatile market mood, although it is managing to inch higher against some of its rivals.
The upside comes despite a lack of UK economic data, which may be limiting Sterling’s recovery against the US Dollar.
One factor that could be providing the Pound with support, however, is the increase in market expectations of another Bank of England (BoE) interest rate hike. The sticky US inflation print puts more pressure on the BoE to carry on raising rates to keep up with the Federal Reserve.
This morning, BoE Governor Andrew Bailey has said that future rate decisions are going to be ‘tight’ and that there is still work left to do.
With oil and gas prices having spiked recently, fears of another rise in inflation could push the British central bank to press ahead with more tightening.
This may be boosting the Pound today.
GBP/USD Exchange Rate Forecast: American Data to Dent the Dollar?
Looking ahead, there are two events on the calendar that could impact USD.
The first is a speech from Fed policymaker Patrick Harker. Recently, many policymakers at the US central bank have signalled that interest rates may have already peaked, which has piled pressure on USD. If Harker joins the growing chorus of dovish voices at the Fed, the US Dollar may unwind some of yesterday’s gains.
Shortly after, the latest consumer confidence report from the University of Michigan is due out. Economists expect to see morale decline for the third consecutive month. Could this also dent the ‘Greenback’?
Meanwhile, a lack of UK economic data could leave Sterling to continue trading on market risk appetite. Will a gloomy mood keep a lid on GBP?