Pound US dollar (GBP/USD) unclear amid data-light morning
The pound US dollar (GBP/USD) exchange rate is trading without a clear direction this morning with both UK and American data in short supply.
At the time of writing the GBP/USD exchange rate is trading at around $1.2622, virtually unchanged from this morning’s opening rate.
Pound (GBP) wavers amid data lull
An ongoing lack of fresh UK data leaves the pound (GBP) rangebound this morning.
Elsewhere, upbeat reports from accounting and advising firm BDO may serve to keep GBP afloat throughout today’s session, amid hopes that the UK is economy is emerging from technical recession.
BDO’s latest report found that UK business output rose for a second consecutive month, and to its highest level since March 2022.
Kaley Crossthwaite, Partner at BDO, says:
‘Output reaching its highest point in nearly two years illustrates the UK’s robustness in the face of global economic adversities and is a big step towards economic stability and growth.
All eyes are on the Bank of England, with an interest rate cut looking possible for June, as businesses hold out hope for a further recovery this year.’
In addition, Deloitte reported a third consecutive quarter of improved business sentiment amongst UK chief financial officers, pointing to steadily increasing UK economic optimism.
Ahead of Bank of England (BoE) commentary due this afternoon, renewed signs of economic hope in the UK may offer GBP some marginal support.
US dollar (USD) quiet amid lack of macroeconomic releases
The US dollar (USD) is trapped in a narrow range this morning, with notable US data in short supply.
Ahead of the latest US inflation reports on Wednesday, shifting Federal Reserve interest rate cut bets will therefore likely be primary driver of USD movement throughout the session.
According to CME’s Fedwatch tool, the likelihood that the central bank will lower its base rate in June has fallen to 51%, down from a 57% chance last month.
Lottie Gosling, economist at Investec noted:
‘Several FOMC members have commented on the ‘bumpiness’ of US inflation in recent months and so will be keen for evidence that the disinflation trend is indeed continuing.’
While economists expect to see a minor warming of headline inflation later in the week, USD investors may remain hesitant to place any aggressive bets on the ‘greenback’ in the meantime.
Meanwhile, a mixed market mood may continue to curb the safe-haven US dollar’s upside potential throughout today’s session.
Pound US dollar exchange rate forecast: BoE speech to sink the pound?
Coming up, a speech this afternoon from BoE policymaker Sarah Breeden could drive GBP movement. While Breeden is typically known as a more neutral rate-setter at the central bank, any dovish rhetoric may serve to undermine Sterling, boosting speculations of a June interest rate cut.
For the ‘greenback’, a lack of notable releases may see the latest consumer inflation expectations impact USD exchange rates. Should the data show that American consumers anticipate any significant deflation in the coming months, USD could falter.
A speech tomorrow from Fed Neel Kashkari could impact the US dollar, with any dovish signals likely to boost market expectations of summer monetary loosening by the central bank.