Pound US Dollar (GBP/USD) Exchange Rate Treads Water ahead of US GDP

Pound US Dollar (GBP/USD) Trades Sideways amid Data Lull

The Pound US Dollar (GBP/USD) exchange rate is treading water this morning ahead of the latest  US growth data.

At the time of writing the GBP/USD exchange rate is trading at around $1.2634, virtually unchanged from this morning’s opening rate.

US Dollar (USD) Rangebound ahead of GDP Data

The US Dollar (USD) is quiet this morning ahead of impactful GDP data due for release later today.

In the meantime, USD is trading without a clear direction in the wake of mixed commentary from Federal Reserve policymakers.

Fed Governor Christopher Waller, a particularly hawkish and prominent voice, commented:

‘Inflation is still too high, and it is too early to say whether the slowing we are seeing will be sustained. There is still significant uncertainty about the pace of future activity, and so I cannot say for sure whether the (Federal Open Market Committee) has done enough to achieve price stability.

While Waller’s tentative assessment of Fed monetary policy provided little support to USD overnight, the ‘Greenback’ remains quiet ahead of this afternoon’s GDP report.

Pound (GBP) Mixed following BoE Speeches

The Pound (GBP) is choppy this morning despite an increasingly hawkish stance adopted by Bank of England (BoE) policymakers in recent days.

With UK data in short supply this week, investors look to the latest series of speeches from BoE officials for an insight towards looming monetary policy decisions. Following last week’s hawkish commentary from senior policymakers, speakers are now firmly advocating a ‘higher for longer’ narrative regrading interest rates.

Jonathan Haskel, BoE policymaker, affirmed yesterday evening:

‘The labour market is still historically tight. At current rates of change it would take at least a year to fall back to average pre-pandemic tightness. Rates will have to be held higher and longer than many seem to be expecting.’

While data remains sparse, these hawkish BoE statements continue to buoy GBP. However, investors remain somewhat reluctant to place any aggressive bets on the Pound in the absence of supporting economic data.

Pound US Dollar Exchange Rate Forecast: US GDP in Focus

Looking ahead, the latest estimate for US GDP in the third quarter is due out later today and is likely to act as the main catalyst of movement for the US Dollar.

Economists’ estimate today’s data will report a whopping 5% expansion in the US economy. This may see the ‘Greenback’ surge if it tempers Fed rate cut speculation.

On the other hand, rapid increases in GDP may alternatively see risk appetite improve, thereby causing the US Dollar to falter.

USD volatility may also be driven by the latest jobs data on Thursday. A forecast 220,000 rise in initial jobless claims could further dampen already sinking rate hike bets amid signs of a loosening labour market.

A lack of notable UK data in the coming days could leave Sterling vulnerable to shifts in risk appetite. Surmounting inflationary pressures and developing conflict in the Middle East may see the increasingly risk-sensitive Pound slump against the safe-haven USD under a spell of cautious trade.

Yasmine Arasteh

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