Pound US dollar (GBP/USD) exchange rate wavers despite sticky US inflation
Article updated 16:20, 31/5/2024
The pound US dollar (GBP/USD) exchange rate continued to trade without a clear direction this afternoon following the latest US inflation data.
The Federal Reserve’s preferred gauge of inflation, the core PCE price index, printed in line with market projections this afternoon, holding steady for a third consecutive month at 2.8% in April.
Markets appear mostly unmoved by the data, leaving the US dollar (USD) to fluctuate throughout the latter part of the session as Fed rate cut expectations remained unchanged.
Chris Zaccarelli, Chief Investment Officer of a Registered Investment Advisor (RIA) in North Carolina, said:
‘The market has spent this year worried about inflation and there was a sigh of relief this morning when it wasn’t higher than expected and there may even be some good news in the report to the extent that a slowing in consumer spending could portend lower inflation numbers.’
Meanwhile, an ongoing lack of UK data saw the pound (GBP) waver against the majority of its rivals. In addition to this, a shifting market sentiment provided little support for the increasingly risk-sensitive currency.
Looking ahead, could the latest American manufacturing PMI lift the ‘greenback’ at the start of next week?
At the time of writing, GBP/USD is trading at around US$1.2729, virtually unchanged from today’s opening rates.
Original article continues below:
Pound US dollar (GBP/USD) subdued as markets anticipate US core PCE prices
The pound US dollar (GBP/USD) exchange rate is volatile this morning as markets await high impact American inflation data, due for release later today.
At the time of writing the GBP/USD exchange rate is trading at around $1.2714, virtually unchanged from this morning’s opening rate.
US dollar (USD) subdued ahead of key inflation data
The US dollar (USD) is struggling to edge higher this morning as investors appear hesitant to place any aggressive bets ahead of this afternoon’s latest US inflation data.
The core PCE price index, which is due for release later today, is forecast to remain unchanged for a third consecutive month, printing at 0.3% in April.
Chris Turner, Head of Markets at ING, said:
‘The data-dependent Fed means that the April core PCE deflator will be an important market mover should it deviate away from the consensus 0.3% MoM (month-on-month) reading.’
As the Federal Reserve’s preferred gauge of inflation, markets are keen to review the data for any signs of sticky US inflation which could reinforce the central bank’s ‘higher-for-longer’ approach towards interest rates.
Elsewhere, a mixed market mood is preventing the safe-haven US dollar from climbing against its riskier rivals, such as GBP this morning.
Pound (GBP) buoyed by BoE rate cut bets
The pound (GBP) is trading in a wide range against its peers this morning with fresh UK releases in short supply.
Amid a data-light end to the week, the upcoming UK election brings Britain’s long-term economic woes into focus, seemingly deterring investor interest in Sterling so far today.
The latest data from the Institute for Fiscal Studies this morning highlighted the UK’s sluggish economic growth in the thirteen years following the 2008 Great Recession. Median British incomes grew by a meagre 6%, compared to economists expectations of 30% growth, pointing to a gradual decline in living standards across Britain.
Mubin Haq, Chief Executive of abrdn Financial Fairness Trust, commented:
‘Unfortunately, living standards have languished for more than a decade.
On a range of measures UK performance has been weak, especially in comparison to other wealthy countries. The danger is that stagnation becomes the new normal. This is in no one’s interests and stunts too many futures and too many lives.
Key to any future government will be a renewed drive to tackling hardship and improving living standards.’
A lack of macroeconomic releases as the session progresses may see Sterling left rudderless, as economic pessimism weighs on GBP exchange rates.
Pound US dollar exchange rate forecast: US inflation in focus
Looking ahead, investors will be focussed on the hotly anticipated US core PCE price index is this afternoon. Should the data print as forecast, or return any upward surprises, the ‘greenback’ may rally, as signs of continually stubborn US inflation underpin the Fed’s hawkish stance towards monetary policy.
Alternatively, any unexpected inflationary cooling could see USD tumble as markets ramp up their Fed interest rate cut bets.
A lack of UK releases could leave GBP vulnerable to market risk dynamics. Should the high impact US inflation release spark a move towards safe-haven currencies, the increasingly risk-sensitive pound will likely falter.