Pound US dollar (GBP/USD) exchange rate teeters around five-month low
The pound US dollar (GBP/USD) exchange rate has ticked up this morning, however the currency pairing remains close to a five-month low.
At the time of writing, GBP/USD is trading at around US$1.2481, up roughly 0.2% from this morning’s opening rate.
US dollar (USD) wavers despite increased global tensions
The US dollar (USD) is volatile this morning, however, is still trading close to the five-month high reached on Friday.
As tensions escalate in the Middle East this morning following reports of a drone strike from Iran onto Israel, the safe-haven USD is struggling to further strengthen despite increased geopolitical tensions often causing a safe-haven dash.
As experts predict that cooler heads will prevail following the attack, the US dollar has remained trapped in a narrow range.
Deutsche Bank Strategist Jim Reid, explains:
‘Since last Friday, geopolitics has returned as the biggest concern for markets, as investors react to Iran’s attack on Israel over the weekend. But since markets have reopened after the weekend, the reaction among key assets has been subdued, with investors hopeful that any escalation will prove contained.’
USD investors may also be reluctant to place any overly aggressive bets ahead of the latest US retail sales data, expected later this afternoon.
Although the data is forecast to remain in positive territory at 0.3%, a slowdown from a previous reading of 0.6% could weigh on the US dollar should the data match expectations.
Pound (GBP) mixed amid lull in data
The pound (GBP) is fluctuating this morning, rising against USD and some of its riskier assets but flat elsewhere, amid an absence of any macroeconomic data at the start of this week.
As such, investor attention may turn to an upcoming Bank of England (BoE) speech from Monetary Policy Member (MPC) Sarah Breeden later this afternoon amid continued interest rate cut speculation.
With markets currently pricing in a June rate cut at 31%, any dovish commentary from Breeden surrounding the loosening of monetary policy could see that number rise and dent Sterling sentiment in the process.
However, should Breeden refrain from touching on the future of monetary policy, the pound could be left vulnerable to shifts in market mood, and may trade without a clear direction.
GBP/USD exchange rate forecast: UK data to infuse volatility into the Pound?
Looking ahead, the primary driver of movement for the pound US dollar exchange rate following the latest retail sales data from the US will be several UK data releases.
On Tuesday, the UK’s latest jobs data is expected to show that unemployment rose in February from 3.9% to 4%, which 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, forecast to increase from 6.1% to 6.2%.
Moving into Wednesday, the UK’s latest inflation data is scheduled for release.
With both core and headline inflationary figures expected to cool, this could undermine Sterling as inflation edges closer to the BoE’s 2% target, and stymie the pound in mid-week trade.
Turning to the US dollar, the start of this week will bring limited economic data which may in turn see USD trade on risk appetite, and could see the ‘greenback’ firm if markets opt for safer assets this week.