Pound US dollar (GBP/USD) exchange rate ticks higher despite calm market mood
The pound US dollar (GBP/USD) exchange rate is firming this morning, despite a quiet trading session limiting both currencies.
At the time of writing, GBP/USD is trading at around US$1.2658, an increase of 0.2% from today’s opening rates.
Pound (GBP) wobbles amid BoE rate cut bets
The pound (GBP) is wavering this morning, as investors continue to adjust their Bank of England (BoE) interest rate cut bets.
Investors are beginning to suspect that the BoE will begin to loosen its monetary policy in May, as inflationary pressures ease.
This is bringing BoE rate cut expectations in line with existing Federal Reserve predictions. A similar level of easing is expected over the year between the two central banks, dulling GBP/USD.
Furthermore, some investors consider that the BoE may even be the first central bank to cut interest rates, adding additional pressure to GBP.
However, a lack of impactful macroeconomic data is likely serving to mute the pound against most peers this morning.
US dollar (USD) muted amid quiet trade
The US dollar (USD) is off to a tepid start this morning, due to a quiet market mood and a lack of wider data releases.
On the back of last week’s volatile session, this is prompting USD to trim some of its excess gains, and consolidate the rest.
Stability is likely to be the overriding theme of the day’s session, even in the wake of hawkish comments from Federal Reserve official Raphael Bostic. Yesterday, Bostic reiterated his calls for a single rate cut, as opposed to the three pencilled in by his counterparts.
Furthermore, attention is likely shifting towards the incoming core PCE price index data. While this is expected to hold, it may do little for Fed rate cut bets, and could keep USD muted.
Francesco Pesole, FX Strategist at ING, commented:
‘Interestingly, the dollar did not benefit from the remarks, and we suspect that while a core PCE at 0.3% month-on-month (our call and consensus) on Friday shouldn’t do much to encourage dovish bets, the dollar looks more likely to stabilise than stage another rally at this point.’
Pound US dollar exchange rate forecast: US jobless claims uptick to dent USD?
Looking ahead for the US dollar, the core catalyst of movement is likely to be the latest initial jobless claims print.
With jobless claims forecast to have increased during the week ending March 23, the ‘Greenback’ could struggle for support. The US labour market has been under scrutiny recently, and signs of slack could increase rate cut bets, undermining USD.
However, this could be offset by the final GDP growth data for 2023’s fourth quarter. If this confirms an expansion in the US economy, the US dollar could strengthen.
For the pound, a lack of other data may shift focus to the final print of 2023’s Q4 data. As this may confirm that the UK economy contracted, and fell into a technical recession, it could undermine Sterling.