Pound US dollar (GBP/USD) exchange rate flat amid data lull
The pound US dollar (GBP/USD) exchange rate is rangebound this morning, amid a lack of impactful macroeconomic data for either currency.
At the time of writing, GBP/USD is trading at around US$1.2652, showing little movement from the morning’s opening rates.
Pound (GBP) underpinned by forecast-beating retail sales data
The pound (GBP) is treading water this morning, as high-impact data remains hard to come by.
However, Sterling is likely being supported by a notably better-than-forecast batch of retail sales data from the British Retail Consortium (BRC).
In March, the BRC found that sales increased by 3.2%, significantly above expectations of a 1.8% increase. This early-Easter boost is likely serving to brighten the outlook for the UK’s vital retail sector, keeping GBP afloat.
Linda Ellet, Head of Consumer Markets, Leisure and Retail at KPMG, commented:
‘High street sales growth was driven by food and drink, health and beauty and keen gardeners who headed outside to enjoy the first days of spring. There were also some signs of improvement, with more categories starting to see positive sales growth in March for the first time in months.’
However, a quiet market mood is likely keeping the pound limited in its movements, due to its increasingly risk-sensitive nature.
US dollar (USD) muted amid light data calendar
The US dollar (USD) is wavering this morning, amid a lack of impactful data releases.
Owing to pullback in US Treasury bond yields, USD is unable to gain a foothold despite a relatively risk-off market mood.
Investors are continuing to analyse the Federal Reserve’s interest rate cut strategy for the remainder of the year. Between robust economic data and signs of persistent inflationary pressures, it remains unclear when the Fed may begin to cut interest rates.
Now, markets expect 60bps of rate cuts from the Fed this year, compared to 150bps at the start of 2024. This marks the lowest expectations since October 2023, and is serving to keep USD afloat in lieu of other data.
This is likely being reaffirmed by comments from Minneapolis Fed Bank President Neel Kashkari. In a speech last night, Kashkari reiterated that inflation remains above the Fed’s 2% target.
He further commented that the Fed cannot ‘stop short’ on the inflation fight, and must continue working to cut it down.
Pound US dollar exchange rate forecast: US inflation uptick to boost USD?
Looking ahead for the US dollar, the core catalyst of movement is likely to be March’s inflation data, due tomorrow.
The headline consumer price index reading is forecast to have edged higher during the month, rising to 3.4%. This could suggest sticky inflation, and prompt USD to rise on the back of postponed interest rate cut bets.
Later, the latest Federal Open Market Committee (FOMC) meeting minutes are due to be published. If these contain any hints of an imminent rate cut from the Federal Reserve, the ‘greenback’ could reverse any gains.
For the pound, meanwhile, impactful data releases remain hard to come by. Because of this, Sterling may continue to see little in the way of clear movement.
However, due to its increasingly risk-sensitive nature, a shift towards bullish trade could strengthen GBP exchange rates.