Pound US dollar (GBP/USD) exchange rate slides as market mood sours
Article updated 16:25 14/6/2024:
The pound US dollar (GBP/USD) exchange rate is falling further this afternoon, as the market mood remains dismal.
Owing to an absence of domestic data, the pound (GBP) has little safeguarding and is left exposed to the sour tone.
However, the US dollar (USD) is trimming some of its gains this afternoon amid a surprise fall in consumer confidence.
The Michigan consumer confidence index data printed at 65.6, a drop from a reading of 69.1 in May and below forecasts of an increase to 72.
However, the fundamentally bearish tone to today’s trade is allowing the ‘greenback’ to rally on safe-haven flows.
At the time of writing, GBP/USD is trading at around US$1.2679, a fall of roughly 0.6% from today’s opening rates.
Original article continues below:
Pound US dollar exchange rate slips amid downbeat market mood
The pound US dollar exchange rate is weakening this morning, amid a risk averse market impulse.
At the time of writing, GBP/USD is trading at around US$1.2724, a fall of just over 0.2% from today’s opening levels.
US dollar (USD) firms amid risk-off trade
Risk averse trade is strengthening the US dollar this morning, as it enjoys safe-haven flows amid growing market jitters.
Investors are growing more concerned about the political situation in Europe, following the release of an approval poll.
French President Emmanuel Macron’s approval rating fell to the lowest levels since 2018, which is coalescing with other concerns over political instability in the Eurozone.
Furthermore, a disappointing conference from the Bank of Japan (BoJ) is further supporting USD this morning.
Elsewhere, investors are likely awaiting this afternoon’s US consumer sentiment index. In June, confidence is forecast to have increased from a reading of 69.1 to 72.
This could cement comments from Federal Reserve Chair Jerome Powell, who commented:
‘Consumer spending is still growing. It’s not growing at the pace it was growing at a year or so ago, but it’s still growing solidly. Spending on equipment and intangibles has picked up quite a bit … So, overall, the economy is exhibiting solid growth.’
A positive reading could reinforce this perception, and strengthen USD further later in today’s session.
Pound (GBP) lacks direction amid short supply of data
The pound is trading without clear direction this morning, due to a continued absence of impactful economic data.
This is serving to leave the pound exposed to a downbeat market mood, which is applying pressure to the increasingly risk-sensitive currency.
However, GBP is likely remaining afloat amid pared back Bank of England (BoE) interest rate cut bets.
While the BoE is expected to begin cutting rates in August, service sector inflation remains persistently elevated. As this is a figure closely monitored by the central bank, the extent of additional cuts this year remains uncertain.
Markets anticipate a single other interest rate cut in 2024, an expectation which is likely serving to underpin Sterling.
Pound US dollar exchange rate forecast: US retail uptick to lift USD?
Looking ahead for the US dollar, Tuesday brings the release of the latest US retail sales data, reflecting consumer activity in May.
Markets expect an increase of 0.3% in retail sales on a monthly basis, which could strengthen the ‘greenback’. The US economy is largely driven by consumption, and signs of improved retail sales would likely ring positive for the US’ economic outlook.
For the pound, next week is set to begin slowly due to a lull in domestic data releases. This could see the increasingly risk-sensitive Sterling trade in tandem with shifts in risk appetite.
If bullish trade occurs, GBP could firm against the safe-haven US dollar. However, if the market mood remains downbeat, the pound may struggle to find its footing.