Pound US dollar (GBP/USD) exchange rate tumbles amid warming BoE rate cut bets
(Updated 16:15, 22/04/22) The pound US dollar (GBP/USD) exchange rate continued to trend lower as the session progressed, hitting fresh five-month lows amid shifting interest rate cut speculations.
After dipping against the US dollar (USD) this morning, the Pound (GBP) has since tumbled against the majority of its rivals as ramped up Bank of England (BoE) interest rate cut speculations left Sterling rudderless amid a lack of fresh data.
Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, said:
‘London’s blue-chip index has had a surge of power as heightened geopolitical tensions have eased, and investors assessed the brighter prospects for the UK economy, with interest rate cuts spied on the horizon.’
Meanwhile, an uptick in US Treasury bond yields lent the ‘greenback’ some additional support, with optimistic investors deferring their Federal Reserve interest rate cut speculations.
At the time of writing, GBP/USD is trading at $1.2333, down from $1.2337 this morning.
The focus moving forward will be the latest preliminary Purchasing Managers Index (PMI) reports, with releases due for both the UK and the US.
Could a second consecutive month of expansion for the UK’s manufacturing industry see GBP rebound against its peers?
Original article continues below:
Pound US dollar (GBP/USD) slumps amid ramped up BoE rate cut bets
The pound US dollar (GBP/USD) exchange rate is on the defensive this morning as a lack of impactful data leaves the currency pairing vulnerable to interest rate cut speculations and market volatility.
At the time of writing the GBP/USD exchange rate is trading at around $1.2337, down approximately 0.3% from this morning’s opening rate.
Pound (GBP) slumps amid data lull
The pound (GBP) is trading without a clear trajectory this morning with data in short supply.
Amid a lack of notable releases, investors look towards recent Bank of England (BoE) commentary and shifting interest rate cut speculations.
Most recently, BoE Governor Dave Ramsden echoed Governor Andrew Bailey’s suggestion that UK inflation could promptly reach the central bank’s 2% target. This served to heighten interest rate cut speculations, as the senior policymakers indicated that monetary unwinding may be closer than previously imagined.
Speaking at the Peterson Institute of International Economics on Friday, Ramsden said:
‘Given we know the level of the Ofgem price cap for April and also taking account of the freezing of fuel duties in the March Budget, then other things equal we can be confident headline CPI inflation will fall sharply in April, to close to the 2% target.’
US dollar (USD) subdued amid upbeat trading conditions
The US dollar (USD) is facing headwinds this morning as market risk dynamics continue to drive the safe-haven currency’s movement.
Amid a lack of US macroeconomic releases throughout today’s session, the safe-haven ‘greenback’ is struggling to garner investor interest as cheery investors favour the currency’s riskier peers.
Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, noted:
‘The FTSE 100 has spring in its step at the start of the week, amid an easing of geopolitical tensions.
The pulse of positivity comes in the absence of fresh retaliatory attacks by Israel or Iran and the US flexing its funding muscle and passing a crucial aid package for Ukraine.’
Meanwhile, a 1.29% slump in gold prices sees the precious metal fall to a one-week low. Due to the US dollar’s typically inverse relationship with the commodity, waning gold prices may offer USD some mild support as the session progresses.
Pound US dollar exchange rate forecast: markets eye PMIs
Coming up, the latest American PMIs are due for release tomorrow. Economists forecast upbeat readings from both the services and manufacturing sectors, with both indexes set to edge higher to 52 in April. Should the data print as forecast, USD could strengthen amid ongoing expansion within both vital sectors.
The UK’s latest preliminary PMIs are also due to print on Tuesday. With both the manufacturing and service sector set to report another month of expansion, GBP could gain ground against its rivals amid signs of increased economic output heading into the second quarter of 2024.
Later in the session a speech from BoE Chief Economist Huw Pill could drive additional GBP movement. Following recently dovish signals from senior BoE policymakers, any additional talks of monetary loosening could limit Sterling’s upside potential.