Pound US dollar (GBP/USD) exchange rate muted amid cautious Fed remarks
The pound US dollar (GBP/USD) exchange rate is rangebound this morning, as investors continue to analyse comments from Federal Reserve Chair Jerome Powell.
At the time of writing, GBP/USD is trading at around US$1.2657, showing little movement from the morning’s opening rates.
US dollar (USD) stumbles in the wake of cautious Fed commentary
The US dollar (USD) is slipping this morning, as risk-on trade weighs on the safe-haven currency, prompting weakness against some peers.
Furthermore, cautious commentary from Federal Reserve Chair Jerome Powell last night continue to weaken USD.
In a speech, Powell reiterated the Fed’s current cautious standpoint, stating that it remained too soon to call the inflation fight over.
He stated that:
‘We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down towards 2 per cent. We have time to let the incoming data guide our decisions on policy. The outlook is still quite uncertain, and we face risks on both sides.’
Additionally, investors are likely shifting away from the US dollar as markets await impactful data later in the session.
The latest Challenger job cuts data and initial jobless claims are due, and further signs of cooling employment may hamper the ‘Greenback’ in the afternoon.
Pound (GBP) stifled by slowing service sector activity
The pound (GBP) is softening this morning, following a downward revision in March’s final services PMI reading.
On a monthly basis, activity in the vital sector slowed more than the preliminary reading suggested, but remained in growth.
While the print is beneath investor expectations, it still sets the stage for the UK to exit its current recession.
Tim Moore, Economics Director at S&P Global Market Intelligence, commented:
‘Business activity has now expanded for five consecutive months, supported by sustained improvements in new order intakes. The solid growth rate achieved in March reinforces the view that a rebound in service sector performance is helping the UK economy to pull out of last year’s shallow recession.’
Additionally, upbeat trading conditions are keeping GBP afloat against safer assets such as the US dollar. However, this is equally further weakening the pound against more risk sensitive currencies.
Pound US dollar exchange rate forecast: US non farm payrolls data in focus
Looking ahead for the US dollar, tomorrow brings the release of the latest non farm payrolls data.
Economists forecast the number of jobs created in March to have plummeted from 275,000 to 200,000, which could inject volatility into USD exchange rates.
As the US labour market has been in focus this week, further signs of slack in employment could weigh heavily on the US dollar.
If the labour market continues to cool, it may prompt the Federal Reserve to cut interest rates sooner than expected, further weakening USD.
For the pound, meanwhile, minimal data is likely to restrict Sterling’s movements through to the end of the week.
However, if risk appetite improves, GBP could gain ground against the safe-haven US dollar due to its increasingly risk-sensitive nature.