Pound US dollar (GBP/USD) exchange rate strengthens following US GDP print
Article updated 16:10, 30/5/2024
The pound US dollar (GBP/USD) exchange rate is firming this afternoon following the latest American GDP and labour data.
The US dollar (USD) retreated from this morning’s highs as the latest batch of GDP data showed a significant easing of domestic growth in the first quarter of 2024, amid softening consumer spending.
The second GDP estimate reported a downwardly revised 1.3% growth through the start of the year, notably dipping from 3.4% in the previous quarter, and pointing to the slowest pace of growth since the first half of 2022.
In addition to this, initial jobless claims in the US rose more than anticipated in the first week ending 25 May, to 219,000, slightly surpassing market projections of 218,000.
Signs of economic easing in the superpower economy serve to undermine USD exchange rates, leaving the ‘greenback’ on the defensive as the session nears an end.
Elsewhere, an ongoing lull in UK data sees the pound (GBP) edge higher against its safe-haven peers, as an increasingly bullish market sentiment underpins the increasingly risk-sensitive currency.
Looking ahead, the latest core PCE price index is due for release tomorrow. Could signs of sticky US inflation see USD recoup today’s losses?
At the time of writing, GBP/USD is trading at around US$1.2742, up approximately 0.3% from today’s opening rates.
Original article continues below:
Pound US dollar (GBP/USD) subdued as markets dial back rate cut bets
The pound US dollar (GBP/USD) exchange rate is rangebound this morning as investors continue to defer central bank interest rate cut speculations, ahead of this afternoon’s market moving releases.
At the time of writing the GBP/USD exchange rate is trading at around $1.2716, virtually unchanged from this morning’s opening rate.
Pound (GBP) buoyed by BoE rate cut bets
The pound (GBP) is trading without a clear trajectory against the majority of its rivals this morning amid an ongoing lack of UK macroeconomic releases.
With data in short supply, deferred Bank of England (BoE) interest rate cut bets continue to keep Sterling afloat. Markets have slashed their expectations of a June rate cut from the BoE, underpinning the pound in recent days as the upcoming UK election takes precedent for the central bank.
Dean Turner, Chief UK Economist at UBS Wealth Management, said:
‘Short-term noise and one CPI print that’s good or bad can turn whole the narrative around central banks, and then the next month it will swing back again. There’s a bit more uncertainty around the timing and full extent of any moves from the Bank of England this year.’
Elsewhere, a cautiously upbeat market mood is lending the increasingly risk-sensitive pound some support against its safe-haven peers.
US dollar (USD) surges on dialled back Fed rate cut bets
The US dollar (USD) is touching a fresh weekly high this morning as markets continue to defer their Federal Reserve interest rate cut bets.
Ahead of this afternoon’s high-impact GDP and jobs data, speculations surrounding tomorrow’s hotly anticipated core PCE price index also serve to strengthen the ‘greenback’.
With the index due to hold steady at 0.3% in April, sticky US inflation will likely underpin the Fed’s increasingly hawkish stance, indicating that the central bank could maintain its ‘higher for longer’ approach towards interest rates.
Kyle Rodda, Senior Financial Market Analyst at capital.com, explained:
‘A rise in global yields is forcing a re-rating in global equity prices, with Wall Street falling further overnight. Upward pressure on yields was compounded by a weak seven-year auction, reigniting fears about how the US will fund its rising deficit.’
Pound US dollar exchange rate forecast: US GDP in focus
Looking ahead, the second estimate for first quarter growth in the US is due for release this afternoon. Economists forecast a significant slowdown, with GDP forecast to print at 1.3%, notably falling from 3.4% growth in the first quarter.
Should the data print as forecast, a sharp decline in US growth may see the ‘greenback’ tumble from its recent highs, leaving USD rudderless later today.
In addition to this, the latest initial jobless claims are due for release later today, with a forecast increase to 218,000. Any signs of renewed loosening in the US labour market may further undermine the ‘greenback’ later today.
Fed Lorie Logan is also due to speak tonight, with any further talks of continually restrictive monetary policy likely to lend USD some support, reinforcing market speculations of deferred Fed rate cuts.