Pound US Dollar (GBP/USD) Exchange Rate Remains Weak amid Bearish Trade
Article updated 16:35, 7/11/2023:
The Pound US Dollar (GBP/USD) exchange rate is remaining negative this afternoon, as investors remain in thrall to safe-haven currencies.
The dismal market mood is allowing the ‘Greenback’ to remain strong against riskier assets such as the Pound, despite mixed comments from Federal Reserve officials.
During a speech, Chicago Fed President Austan Goolsbee stated that:
‘Over the next couple of months, we might equal the fastest drop in inflation in the last century, so we’re making progress on the inflation rate. And as long as we’re making progress, as I’ve been saying for a while, the moment of arguing how high should the (policy) rate go is going to fade to how long should we keep rates at this level as inflation is coming down.’
At the time of writing, GBP/USD is trading at around US$1.2302, a fall of just over 0.3% from the morning’s opening rates.
Original article continues below:
Pound US Dollar (GBP/USD) Exchange Rate Drops amid Downbeat Trade
The Pound US Dollar (GBP/USD) exchange rate is sliding this morning, as risk appetite wanes across the markets.
At the time of writing, GBP/USD is trading at around US$1.2288, falling by over 0.4% from the morning’s opening rates.
US Dollar (USD) Rallies as Market Mood Deteriorates
The US Dollar (USD) is strengthening this morning, as a souring market mood pushes investors towards the safe-haven.
Following from last week’s risk-on rally, appetite has begun to fade at the beginning of today’s session. As such, investors appear to be repricing the ‘Greenback’, repositioning after it tumbled into over-sold territory.
The downbeat tone has likely been prompted by a shock fall in Chinese exports in October. This morning’s Chinese trade data found that exports had fallen by 6.4%, which is weighing on risk appetite.
Additionally, the Reserve Bank of Australia’s (RBA) interest rate hike this morning has prompted speculation around the Federal Reserve’s next steps.
Chris Turner, Global Head of Markets and Regional Head of Research for UK & CEE at ING, commented:
‘The poor performance of AUD/USD may owe to positioning, or perhaps some read that if the RBA needs to restart its tightening cycle after a four-month pause, maybe the Fed does too.’
Pound (GBP) Struggles as BoE Hike Bets Recede
The Pound (GBP) is trading in a wide range this morning, as a lack of data leaves Sterling exposed to the bearish impulse.
Furthermore, Sterling may be struggling to find its footing as investors continue to mull dovish comments from Bank of England (BoE) Chief Economist Huw Pill.
In a speech yesterday evening, Pill commented that expectations for rate cuts in mid-2024 appear reasonable.
Pill stated:
‘[The middle of next year] doesn’t seem totally unreasonable, at least to me. It is at that point you might consider or reassess, if nothing new has happened, where we are going to have to be. But, of course, it is very unlikely that nothing will change over that nine-month period.’
This is likely prompting a further reduction in BoE interest rate hike bets, contributing headwinds to Sterling today.
Pound US Dollar Exchange Rate Forecast: Fed Chair Powell Speech to Boost USD?
Looking ahead for the US Dollar, the core catalyst of movement is likely to be a speech from Fed Chair Jerome Powell tomorrow.
If Powell strikes a hawkish note in his speech by suggesting the door remains open for another rate hike, USD could rally. However, if he maintains the caution seen in previous communications, the ‘Greenback’ could suffer losses.
This is followed on Thursday by the latest US initial jobless claims. Recent employment data has shown growing slack in the US labour market, and if claims increase as forecast USD may weaken.
For the Pound, meanwhile, the data calendar looks light for the short term. Because of this, Sterling may be left vulnerable to shifts in the market mood. If bearish trade conditions continue, GBP exchange rates could remain tepid at best.