Pound US dollar (GBP/USD) exchange rate rises amid improving market mood

Pound US dollar (GBP/USD) exchange rate firms amid improving market mood

Article updated 16:28, 13/05/2024:

The pound US dollar (GBP/USD) exchange rate is rising this afternoon, amid elevated levels of risk appetite.

The bullish trading impulse is serving to lift the increasingly risk sensitive pound over the safe-haven US dollar.

Furthermore, the upbeat trading conditions are preventing USD from capitalising on a hawkish speech from Federal Reserve Vice Chair Philip Jefferson.

During a speech, Jefferson stated that:

‘I think it is appropriate to keep the policy rate in restrictive territory. The decline in inflation has attenuated in the first quarter of this year and that, for me, is a source of concern.’

As Jefferson’s speech failed to cushion the ‘greenback’, it is weakening against most major peers.

At the time of writing, GBP/USD is trading at around US$1.2553, an increase of just over 0.2% from today’s morning rates.

Original article continues below:

Pound US dollar (GBP/USD) exchange rate flat despite upbeat UK economic outlook

The pound US dollar (GBP/USD) exchange rate is tepid this morning, despite an upbeat slate of UK economic analysis.

At the time of writing, GBP/USD is trading at around US$1.2528, showing little movement from the morning’s opening rates.

Pound (GBP) muted despite upbeat economic analysis

The pound (GBP) is wavering this morning, as a lull in data releases limits the currency’s appeal amongst investors.

However, positive analysis of the UK’s economic outlook is likely keeping it underpinned against its peers.

In the wake of stronger than expected GDP data last Friday, the UK economy appears to be ‘turning a corner’. A report from BDO, an accounting and business advisory firm, suggests consumer spending power is aiding the UK economy.

Kaley Crossthwaite, a partner at BDO, commented:

‘Cautious optimism is the order of the day for UK businesses hoping for an interest rate cut this summer. It’s heartening to see a turning point begin to materialise for the economy, with the services sector driving the bounce back so far from last year’s technical recession.’

However, as an element of this optimism is born from expectations of lowered interest rates, the pound is remaining listless.

The Bank of England (BoE) is likely to begin cutting interest rates in June, which is serving to undermine Sterling.

US dollar (USD) wavers amid lack of data

The US dollar (USD) is wobbling this morning, as a lack of impactful data releases leaves it exposed to market dynamics.

As a safe-haven currency, risk averse trade can benefit USD against some peers. However, as the day’s trade is more of a mixed affair thus far, USD is struggling to find its footing.

Markets are likely hesitant to bet on the US dollar as they await further commentary from Federal Reserve officials.

This afternoon, Cleveland Fed President Loretta Mester is due to deliver remarks, as is Vice Chair Philip Jefferson.

If the speeches both reflect a hawkish approach to interest rate cuts, the US dollar could gain ground this afternoon.

Pound US dollar exchange rate forecast: UK labour data in focus

Looking ahead for the pound, tomorrow brings the release of the latest slate of UK wage data. In the three months preceding March, average earnings excluding bonuses are anticipated to have cooled to 5.9%.

As one of the Bank of England’s key inflationary pressures, this could spark interest rate cut bets, weakening GBP.

Furthermore, the latest unemployment rate is forecast to show an uptick in March, with the figure expected to rise to 4.3%.

If the UK labour market is continuing to slow, BoE rate cut bets could increase, weakening Sterling against its peers.

For the US dollar, focus will be on a speech from Federal Reserve Chair Jerome Powell, who is due to speak Tuesday afternoon.

If he maintains the Fed’s recent hawkish angle, USD may strengthen. However, if he maintains that rate cuts are still on the table, the ‘greenback’ could slide.

John Mulcahey

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