Pound US Dollar (GBP/USD) exchange rate catches bids as UK inflation rises
The Pound US Dollar (GBP/USD) exchange rate is gaining ground this morning, after the UK reported an unexpected rise in UK Inflation.
At the time of writing the GBP/USD exchange rate is trading at around $1.2693, up roughly 0.4% from this morning’s opening rate.
Pound (GBP) jumps on stronger-than-expected inflation
The Pound (GBP) is rallying against most of its peers this morning, after hotter-than-expected inflation data was published for December.
Headline inflation unexpectedly printed at 4%, up from November’s 3.9% reading, and ahead of forecasts it would slide to 3.8%.
Core inflation held steady at 5.1%, beating expectations it would cool to 4.9%.
This unexpected rise marked the first increase in a 10-month period, and was largely put down to the sale of tobacco and alcohol.
The rise in inflation comes as speculation swirls on when the Bank of England (BoE) will introduce the first interest rate cut this year, with many GBP investors still pricing in cuts by May this year.
Economist at the Resolution Foundation Thinktank, Lalitha Try commented:
‘This serves as reminder that bumps in the lower inflation road are inevitable, but does not change the big picture that price rises are coming in much lower than the Bank of England expected as recently as November.’
US Dollar (USD) bolstered by jittery market mood
The US Dollar (USD), although down against the Pound, is rising against the majority of its other peers this morning as an anxious mood sweeps the markets.
Ongoing tensions surrounding the conflict in the Middle East, and the more recent discord in the Red Sea, has buoyed the safe-haven US Dollar again today, as investors continue to opt for safer currencies amid geopolitical pressures.
With the most recent wave of terror involving fresh airstrikes from Iran onto Pakistan aimed at a Sunni militant group, markets have continued their safe-haven streak, driving investors to USD.
Later today, the latest US retail sales data is set for release. Should the data match an expected 0.4% rise in December, up from 0.3% in November, this may provide the ‘Greenback’ additional support for the rest of today’s session.
GBP/USD exchange rate forecast: Gloomy mood to underpin the US Dollar?
Looking ahead, the Pound US Dollar exchange rate could fluctuate as markets continue to trade with caution as the situation in the Middle East remains in the spotlight.
If risk sentiment remains downbeat its likely USD demand will remain robust.
In terms of data, GBP releases are in short supply until Friday’s, UK retail sales data. With sales growth expected to contract by 0.5% in December, this may weigh on Sterling in the latter stages of the week.
Across the pond, Thursday will see the release of the latest initial jobless claims for the US. An expected rise in unemployment claims last week could temper demand for the US Dollar.