Pound US Dollar (GBP/USD) Exchange Rate Subdued by UK CPI Release
The Pound US Dollar (GBP/USD) exchange rate is trapped in a narrow range this morning after slightly higher-than-expected UK inflation data.
At the time of writing the GBP/USD exchange rate is trading at $1.2199, virtually unchanged from this morning’s opening rate.
Pound (GBP) Quiet following UK CPI Figures
The Pound (GBP) is muted this morning following the release of the UK’s latest inflation data.
The UK’s annual CPI figures showed that headline inflation remained at 6.7%, rather than cooling as forecast in September. Meanwhile, core inflation was reported at 6.1%, down from 6.2% but still falling slower-than-expected.
Data showed that UK inflation remains the highest of the G7 countries, fuelling ongoing concerns over the state of the UK economy. As such, GBP remains subdued today, as investors and analysts expect the Bank of England (BoE) to leave interest rates on hold again next month.
Thomas Pugh, economist at RSM UK speculates that interest rates will remain at 5.25% for another month:
‘Overall, today’s data largely vindicates the MPC’s decision to hold interest rates at 5.25%. If inflation registers a big fall in October, as we expect, the case for further tightening will become even weaker’.
US Dollar (USD) Holds Steady ahead of Fed Speeches
The US Dollar (USD) is trading sideways this morning ahead of impending Federal Reserve speeches later today.
With US retail sales and industrial production coming in above expected, the US economy appears resilient. Economist Christopher Rupkey at FWDBONDS, speculates how recent data may influence Fed decisions in the absence of Fed decision clarity:
‘Fed officials have another rate hike this year up on their forecast board, and they will need to use it, if the economic data continues to surprise economists on the upside’.
However, USD’s potential gains seem to be capped as ahead of the speeches later this afternoon.
Recent Fed commentary has been notably mixed in recent days. Expect to see the US Dollar retreat later this afternoon if more Fed policymakers appear to question the need for further monetary tightening.
Pound US Dollar Forecast: Fed Speeches to Sway USD Movement?
Later today, a series of speeches from Federal Reserve policymakers may stimulate USD movement in the absence of fresh data.
Recent Fed commentary has become increasingly dovish. Which could trigger a slump in the US Dollar if this sentiment is echoed today.
However, if Fed officials strike a more hawkish tone, the ‘Greenback’ could be lifted.
Looking to the UK, notable data remains thin on the ground until later in the week. On Friday, UK retail sales is expected to report a slump in sales growth which could dent GBP.
In the interim, Sterling movements may be driven by risk sentiment. Amid the ongoing Israel Hamas conflict, investors continue to broadly favour safe-haven currencies instead of the increasingly risk-sensitive Pound.