Pound US dollar (GBP/USD) wavers near four-week high ahead of US inflation print

Pound US dollar (GBP/USD) surges to five-week high as US inflation cools

(Updated 16:30, 15/05/2024:) The pound US dollar (GBP/USD) exchange rate spiked this afternoon following the latest US inflation prints.

Both headline and core inflation eased as forecast in April 2024, falling to 3.4% and 3.6%, respectively, aligning with market projections.

Cooling inflation saw the US dollar (USD) tumble to a fresh monthly low, as investors dialled up their Federal Reserve interest rate cut speculations, mulling over the likelihood of summer monetary loosening from the Fed.

Richard Flynn, Managing Director at Investment Firm Charles Schwab UK,

‘Officials have been fairly consistent in stating that current interest rates are sufficiently restrictive to bring inflation under control and that the next move will be a cut.’

In addition to this, US retail sales slowed to 3% in April, falling below expectations of 3.8% and down from the same in March, further deterring investor interest in the ‘greenback’.

The weighty release saw bullish trading conditions permeate global markets, which in turn bolstered the increasingly risk-sensitive pound (GBP) against its safe-haven rivals.

Tomorrow, the latest American jobs data is due for release. Could signs of easing unemployment see USD recoup today’s losses?

At the time of writing, GBP/USD is trading at around $1.26694, up approximately 0.7% from today’s morning level.

Original article continues below:

Pound US dollar (GBP/USD) subdued as markets await American inflation data

The pound US dollar (GBP/USD) exchange rate is trading without a clear trajectory this morning prior to the latest batch of US inflation data.

At the time of writing the GBP/USD exchange rate is trading at around $1.2605, virtually unchanged from this morning’s opening rate.

US dollar (USD) rangebound ahead of US inflation report

The US dollar (USD) is trapped in a narrow range this morning as markets prepare for the latest US inflation data, due for release this afternoon.

Amid a data-light morning, the latest Federal Reserve commentary weighs on USD exchange rates, with investors seemingly reluctant to place any aggressive bets on USD in the meantime.

Speaking at a conference in Amsterdam yesterday, Federal Reserve Chair Jerome Powell noted that inflation has been falling at a slower rate than previously anticipated.

Powell said:

‘We did not expect this to be a smooth road. But these [inflation readings] were higher than I think anybody expected.

What that has told us is that we’ll need to be patient and let restrictive policy do its work.’

With high inflation and hawkish Fed rhetoric permeating the first quarter of 2024, the US dollar has climbed against its rivals as investors continually defer their Fed rate cut expectations.

However, recent policymaker divergence and downbeat employment data has muddied the waters surrounding the likelihood of continually hawkish Fed policy.

As such, markets are particularly eager to analyse the latest inflationary trends this afternoon, in order to ascertain a clearer idea of the Fed’s potential monetary policy shifts in the coming months.

Pound (GBP) stunted by BoE rate cut bets

The pound (GBP) is struggling to garner investor support this morning amid a lack of fresh macroeconomic releases in the UK.

With data in short-supply, Bank of England (BoE) Chief Economist Huw Pill’s dovish tilt seemingly deters investor interest in the pound.

Speaking in an online presentation organised by the ICAEW last night, Pill stated that the central bank could be open to monetary loosening in June, in alignment with market forecasts.

‘I think it’s not unreasonable to believe that through the summer we will begin to see enough confidence in the decline in persistence that Bank Rate will come into consideration.’

With UK data in short supply through the remainder of the session, GBP may continue to face headwinds as ramped up interest rate cut speculations undermine Sterling’s upside.

Pound US dollar exchange rate forecast: US inflation in focus

Looking forwards, the ‘greenback’ may encounter some notable volatility this afternoon, following the release of the latest US inflation data. Economists forecast an easing in both core and headline inflation in April’s annualised figure, to 3.6% and 3.5%, respectively.

Should the data print as forecast, signs that American inflation is moving on a downward trajectory once again may dent USD exchange rates.

Elsewhere, speeches from Fed policymakers Michelle Bowman and Neel Kashkari could drive additional USD movement. Should either policymaker lean dovish, ramped up interest rate cut bets could sink the ‘greenback’.

A data-light session in the UK may see the pound trade primarily on market risk dynamics. A bullish market sentiment could see the increasingly risk-sensitive currency continue to trend higher against the safe-haven US dollar. Alternatively, a spell of anxious trade will likely see USD take precedent.

Yasmine Arasteh

Contact Yasmine Arasteh


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