Pound US Dollar (GBP/USD) exchange rate wavers amid mixed UK economic releases
The Pound US Dollar (GBP/USD) exchange rate is flat this morning, amid mixed economic data for the UK.
At the time of writing, GBP/USD is trading at around US$1.2685, showing little movement from the morning’s opening levels.
Pound (GBP) undermined by mixed economic outlook
The Pound (GBP) is enduring largely muted trade this morning, amid a lack of impactful macroeconomic data.
Additionally, less important data releases are painting a mixed picture of the UK’s economic outlook. While the final composite PMI for February was revised higher to 53, retail sales slowed notably.
The British Retail Consortium (BRC), found that sales increased by a meager 1.1% in February 2024, compared to last year’s 5% growth.
Between wet weather and continued pressure on consumers’ spending ability, retailers struggled to entice customers.
Danni Hewson, Head of Financial Analysis at AJ Bell, commented:
‘The backdrop remains difficult for a lot of consumers as interest rates are persistently high and household finances remain under pressure. Therefore, time away from the shops is more likely to result in less spending rather than shifting the emphasis to the online sales channel.’
Elsewhere, continued speculation around the upcoming Spring Budget is further limiting Sterling’s appeal. With the budget due tomorrow, investors are likely hesitant to support GBP beforehand.
US Dollar (USD) quiet ahead of ISM services PMI
While markets await the latest ISM services PMI this afternoon, the US Dollar (USD) is trading in a muted capacity.
Underpinning the ‘Greenback’ this morning is the consensus that the Federal Reserve is in no hurry to cut interest rates.
Yesterday, Atlanta Fed President Raphael Bostic suggested a cut in the third quarter, followed by a pause. This sparked speculation that the Fed would not pursue a linear reduction in interest rates, and continues to underpin USD this morning.
Elsewhere, trading conditions are faintly bearish today, following downbeat economic forecasts from China. While the economic superpower’s target growth rate remains at 5%, early indications suggest it may struggle to hit that target.
Pound US Dollar exchange rate forecast: Spring Budget in focus
Tomorrow, UK Chancellor Jeremy Hunt delivers the Spring Budget, which is likely to induce volatility in the Pound.
The contents of the budget remain up in the air, however Chancellor Hunt has been eyeing potential tax cuts. With the headroom for any cuts having shrunk notably in recent times, any tax reductions could undermine Sterling.
Looking ahead for the US Dollar, all eyes will be on Federal Reserve Chair Jerome Powell’s testimony, beginning tomorrow. Powell is expected to discuss monetary policy with a bipartisan committee, and may face pressure to begin cutting interest rates.
If Powell maintains a hawkish outlook and pushes back against these expectations, the ‘Greenback’ could climb. However, if he opens the door to rate cuts, USD could slump against its peers.
Additionally, the latest JOLTs job openings data is due to print tomorrow. In January, the number of jobs created is forecast to have fallen to 8.9 million, which may weigh on USD exchange rates.