Pound US Dollar (GBP/USD) plunges to fresh five-month low
(Updated 16:00, 12/04/24) The pound US dollar (GBP/USD) exchange rate has hit a fresh five-month low this afternoon as diminishing Federal Reserve interest rate cut bets combined with a cautious market mood has seen the safe-haven ‘greenback’ soar against the majority of its peers.
Following Wednesday’s hotter-than-expected US inflation data which in turn delayed rate cut bets from June to September, the US dollar (USD) is continuing to enjoy high levels of success through to the end of the week.
The pound (GBP) has continued to waver through to the afternoon following the UK’s latest GDP data, as investors continued to speculate over the overall health of the UK economy.
At the time of writing, GBP/USD is trading at around $1.2436, down roughly 0.7% from today’s opening levels.
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Pound US dollar (GBP/USD) exchange rate softens following UK GDP
The pound US dollar (GBP/USD) exchange rate is losing ground this morning and has fallen to a fresh four-and-a-half-month low following the release of the UK’s latest GDP reading.
At the time of writing, GBP/USD is trading at around US$1.2513, down roughly 0.3% from this morning’s opening rate.
Pound (GBP) wavers following UK GDP data
The pound (GBP) is wavering this morning, faltering against some of its stronger peers but managing to hold steady elsewhere, following the UK’s latest GDP print.
February’s data confirmed market expectations of a 0.1% increase, following January’s upwardly revised 0.3% figure, and boosted hopes that the UK is on its way to escaping recession.
However, the minor 0.1% increase confirmed by the Office for National Statistics (ONS) has divided experts, with some analysists speculating on the seemingly ongoing fragility of the UK economy.
ONS Director of Economic Statistics Liz McKeown commented on the 0.1% rise and explained:
‘The economy grew slightly in February with widespread growth across manufacturing, particularly in the car sector… Looking across the last three months as a whole, the economy grew for the first time since last summer.’
Although the figures point to a return to growth for the UK economy since its winter recession, many analysts are pointing out that growth has stagnated in the long term as higher interest rates continue to dampen activity. As a result, GBP/USD is on the back foot.
US dollar (USD) firms ahead of consumer sentiment reading
The US dollar (USD) is edging higher against the majority of its counterparts this morning as the recent pullback in Federal Reserve interest rate cut bets continues to underpin the American currency.
In the wake of Wednesday’s hotter-than-forecast inflation rate reading, markets have drastically scaled back expectations for policy loosening from the Fed, thereby boosting the US dollar to five-month highs.
Yesterday’s dovish forward guidance from the European Central Bank (ECB) and today’s UK GDP data have further cemented bets that the Fed will be one of the last major banks to begin unwinding its tightening cycle, drawing fresh support for USD exchange rates.
GBP/USD exchange rate forecast: US retail sales to dent the US dollar?
Looking ahead, the primary driver of movement for the pound US dollar exchange rate at the start of next week is likely to be the latest retail sales data from the US.
Scheduled for release on Monday, the data is forecast to report that retail sales growth slowed to 0.3% in March, decreasing from February’s 0.6% reading.
Should the data match expectations and confirm a cooldown in March’s month-on-month figure, the American currency could begin the week on the back foot against its rivals.
Turning to the pound, the first release of note will come in the form of the UK’s latest jobs data, expected on Tuesday.
With unemployment expected to rise in February from 3.9% to 4%, this could hobble GBP exchange rates on the back of a weakening UK jobs sector. However, this could be offset by an expected uptick in wage growth.