Pound US Dollar (GBP/USD) Exchange Rate Volatile during Data Lull
The Pound US Dollar (GBP/USD) exchange rate is fluctuating in a narrow range this morning, as a lack of fresh economic data leaves the currency pairing to trade without a clear direction
At the time of writing the GBP/USD exchange rate is trading at around $1.2403, virtually unchanged from this morning’s opening rate.
Pound (GBP) Mixed amid Data Lull
The Pound (GBP) is wavering this morning amid a lack of fresh data.
With UK data running thin on the ground, Sterling continues to falter in the wake of yesterday’s cooler-than-expected inflation report. With both headline and core inflation significantly falling, investors continue to opt for GBP’s stronger peers today, as Bank of England (BoE) interest rate hike bets continue to wane.
Economists have expressed concerns that the BoE’s rate hike cycle in recent months could have been overly aggressive, further souring Sterling sentiment, and underpinning speculation of looser policy in the relatively near future.
Suren Thiru, Economic Director at the ICAEW, said that recent data suggests:
‘The Bank of England may have overdone the interest rate rises, and with that, the case for rate setters to pivot towards loosening policy is likely to strengthen.’
Investors may remain averse to GBP as today’s session continues, while the BoE’s rate hiking cycle looks to be firmly over.
US Dollar (USD) Wavers amid Mixed Outlook
The US Dollar (USD) is trading without a clear direction this morning ahead of further data releases this afternoon.
In the meantime, the ‘Greenback’ remains uncertain, following this week’s mixed data releases and falling US inflation.
USD continues to waver near weekly lows after plummeting earlier this week, as investors remain hesitant to place any aggressive bets amid falling Federal Reserve rate hike expectations.
David Mericle, Chief US Economist at Goldman Sachs, affirmed that the US is well on its way to recovery in his latest economic outlook, though signs of a cooling economy continue to dampen investor interest in USD.
Mericle stated:
‘The conditions for inflation to return to target are in place, and the heaviest blows from monetary and fiscal tightening are well behind us.’
Despite suggestion that the US economy has achieved a ‘soft landing’, USD may continue to face headwinds amid signs that the Fed is done raising interest rates.
Pound US Dollar Exchange Rate Forecast: US Employment Data to Drive USD?
This afternoon, the latest US jobs data is due out. Initial jobless claims are expected to drift higher for the week ending 11 November. Should the data print as expected, USD may falter amid signs of a gradually loosening labour market, with US unemployment seeming to be on a steady upward trajectory in recent months.
Investors may also look to the latest US manufacturing production data, due for release later today. Forecast growth of 0.3% may lift the ‘Greenback’ amid signs of robust American output.
Various speeches from Federal Reserve policymakers may also drive USD volatility for the remainder of the week. Should Fed officials strike a hawkish tone in relation to future monetary policy, rate hike bets could rise, lifting USD. However, should the Fed echo recently dovish commentary, rate hike bets may remain pared.
Looking to the UK, the latest retail sales data is due out tomorrow. A forecast increase in October’s retail activity may lend the Pound some much-needed support.