Pound US dollar (GBP/USD) wavers near eight-week high amid data-light morning

Pound US dollar (GBP/USD) subdued near two-month high amid data lull

The pound US dollar (GBP/USD) exchange rate is fluctuating this morning amid a lack of fresh data in both the UK and USA.

At the time of writing the GBP/USD exchange rate is trading at around $1.2702, virtually unchanged from this morning’s opening rate.

Pound (GBP) stymied by dovish BoE

The pound (GBP) is struggling to garner investor support this morning as markets digest the latest Bank of England (BoE) commentary.

Muddled commentary in recent weeks has seen markets split over when central bank’s first interest rate cuts may occur. However, BoE policymaker Ben Broadbent lent dovish this morning, cementing market speculations that the bank’s unwinding cycle is due to promptly begin in the summer months.

Broadbent said:

‘Whatever the priors of its individual members the MPC will continue to learn from the incoming data and, if things continue to evolve with its forecasts – forecasts that suggest policy will have to become less restrictive at some point – then it’s possible Bank Rate could be cut some time over the summer.’

Amid a lack of further supporting data, Sterling may continue to face headwinds as the session progresses. Amid ramped up interest rate cut speculations; GBP will likely remain a less favourable investment option throughout the afternoon.

US dollar (USD) wavers near multi-week lows ahead of Fed speeches

The US dollar (USD) continues to waver near a two-month low this morning amid a lack of macroeconomic releases.

In the absence of any notable data, investors anticipate further commentary from Federal Reserve policymakers, to gain a better understanding of potential shifts in monetary policy in the coming months.

While sticky inflation and a hawkish Fed consensus has ruled over the first quarter of 2024, recent policymaker divergence and signs of US disinflation have muddied the waters surrounding the likelihood of continually hawkish Fed policy.

With the CME FedWatch Tool showing greater market divergence, with the probability of monetary loosening in September having fallen to 50% from a previous 73%, hawkish rhetoric from Fed policymakers appears to be quelling recent rate cut bets, as talks of restrictive policy offset signs of easing inflation.

Because of this, markets may be particularly eager to analyse the looming influx of policymaker commentary, due this afternoon, in order to ascertain a clearer idea of the Fed’s current stance.

Pound US dollar exchange rate forecast: Fed comments to lift USD?

Looking ahead, speeches from Fed policymakers Michael S Barr, Philip Jefferson, Raphael Bostic and Christian Waller will be the primary catalyst of USD movement this afternoon. Should the policymakers strike a hawkish consensus, the ‘greenback’ will likely strengthen as markets defer their rate cut expectations.

However, any muddled comments may see the latest Fed commentary fall by the wayside, thereby denting USD.

Looking to the UK, a lack of fresh releases today may leave the increasingly risk-sensitive pound vulnerable to market risk dynamics, with any bullish trade likely lifting GBP against its safe-haven rivals.

Yasmine Arasteh

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