Pound US Dollar (GBP/USD) exchange rate subdued in early trade
The Pound US Dollar (GBP/USD) exchange rate is on the back foot this morning, as markets await the latest GDP estimate from the United States.
At the time of writing, GBP/USD is trading at $1.2646, down roughly 0.3% from the start of today’s trading session.
US Dollar (USD) strengthens ahead of latest GDP estimate
The US Dollar (USD) is climbing against the majority of its peers this morning as markets await the second estimate of GDP for the fourth quarter of 2023.
In the US, growth in the third quarter of 2023 printed at 4.9%, pointing to a healthy expansion. Forecasters predict the second estimate for Q4 is expected to print at 3.3%.
Should the data confirm another strong expansion in economic growth, this may further bolster USD exchange rates in mid-week trade.
Elsewhere, a cautious market mood is aiding the ‘Greenback’ this morning, as the safe-haven currency firms against its more risk-sensitive counterparts.
Today’s jittery trade is potentially due to ongoing shipping disruptions in the Red Sea. As tensions in the Middle East continue to mount, investors are opting for safer assets.
Pound (GBP) fluctuates ahead of BoE speech
The Pound (GBP) is trending mixed this morning as GBP investors hold off placing any aggressive bets before a speech from Bank of England (BoE) policymaker Catherine Mann.
Mann is one of the more hawkish members of the Monetary Policy Committee, as was seen during last month’s interest rate decision where she was one of two monetary policy members to vote for another rate hike.
As such, she is likely to advocate for tighter monetary policy. If she upholds her hawkish stance in her address today, then this may lend Sterling some support later this afternoon.
GBP/USD exchange rate forecast: US core PCE price index to bolster the US Dollar?
Looking ahead, the primary catalyst of movement for the Pound US Dollar exchange rate in the second half of the week will be the latest US core PCE price index.
The Federal Reserve’s preferred indicator for inflation is expected to print at 2.8% in January. While this is a slight drop from 2.9% in December, it’s a sign that inflation remains sticky.
This is likely to encourage the Fed to keep interest rates on hold for longer and may bolster the US Dollar tomorrow.
Looking past Mann’s speech, the GBP exchange rates may be driven by the release of the latest UK manufacturing PMI.
Friday’s PMI figures are expected to confirm that the sector remained in contraction, with the index only rising from 47 to 47.1. This is likely to undermine Sterling at the end of the week.