Pound US dollar (GBP/USD) exchange rate extends losses ahead of UK data
Article updated 16:40, 17/6/2024
The pound US dollar (GBP/USD) exchange rate struggled to recoup its recent losses this afternoon amid a lack of fresh trading impetus.
With high-impact UK releases due out mid-week, including Britain’s latest inflation reports and the Bank of England’s (BoE) hotly anticipated interest rate decision, the pound (GBP) struggled to attract investor support into the latter part of today’s European trading session.
Chris Turner, strategist at ING, said:
‘Wednesday/Thursday this week should deliver a double-header of negative news for the pound. Here, UK May services CPI should drop sharply on Wednesday and be followed up a day later with tweaks to the BoE policy statement which hint at an August rate cut.’
Meanwhile, a lack of US data saw the Federal Reserve’s cautious approach towards monetary loosening keep the safe-haven US dollar (USD) afloat, despite a slight move away from risk-averse trading conditions.
Looking ahead, could increased consumer activity in the US retail sector lift the ‘greenback’ tomorrow?
At the time of writing, GBP/USD is trading at around $1.2684, virtually unchanged from today’s opening rates.
Original article continues below:
Pound US dollar (GBP/USD) subdued amid lack of data
The pound US dollar (GBP/USD) exchange rate is rangebound this morning as investors anticipate this week’s key UK inflation print.
At the time of writing the GBP/USD exchange rate is trading at around $1.2672, virtually unchanged from this morning’s opening rate.
Pound (GBP) wobbles ahead of inflation data
The pound (GBP) is trading without a clear trajectory this morning as markets brace for the latest batch of UK inflation data.
An absence of fresh releases today leaves hesitant investors reluctant to place any aggressive bets on Sterling, prior to this week’s high-impact releases.
Headline inflation is due to have eased to 2% in May, falling to its lowest level since July 2021, and striking the Bank of England’s (BoE) 2% target rate. Should the data print as expected, a cooling British CPI may see ramped up BoE interest rate cut speculations sink the pound during mid-week trade.
Dan Hanson and Ana Andrade of Bloomberg Economics, said:
‘All eyes will be on the services CPI reading, following April’s stronger-than-expected print. Looking ahead, headline inflation will probably fall below 2% in June, clearing the way for rates to be cut in August.’
In the meantime, GBP may remain rudderless, further stymied by this morning’s spell of risk-averse trade.
US dollar (USD) recoups losses amid cautious trade
The US dollar (USD) continues to fluctuate near a five-week high this morning, despite an absence of fresh US data.
With macroeconomic releases in short supply, USD maintains its upside amid elevated US Treasury bond yields. In addition to this, further pushback against Federal Reserve monetary unwinding serves to keep USD afloat today.
Markets have significantly reduced their interest rate cut projections for the year ahead, now pricing in only one rate cut, rather than three, as anticipated in March.
Fed policymaker Neel Kashkari is amongst those pushing back against monetary loosening, stating that the first rate cut would likely occur in December.
The Fed hawk commented:
‘We’re in a strong position, but if you just said there’s going to be one cut, which is what the median indicated, that would likely be toward the end of the year.’
However, the hawkish remarks had a fairly limited impact on the US dollar, as Kashkari is not due to vote on Fed monetary policy this year.
Meanwhile, a cautiously downbeat market sentiment underpins the safe-haven ‘greenback’ against its more risk-sensitive rivals, offering USD a strong foothold as the week opens.
Pound US dollar exchange rate forecast: Fed speech to underpin USD?
Looking ahead, a speech from Fed policymaker Patrick T Harker may drive USD volatility later today. Should Harker strike hawkish, USD may garner some investor support.
On Tuesday, the latest US retail sales data is due for release. Economists project a 0.2% increase in retail activity in May, following a period of stagnant consumer activity in April. The modest rebound may serve to lift the ‘greenback’, indicating a potential recovery in the American retail sector.
Looking to the UK, a data-light start to the week could see Sterling left vulnerable to market risk dynamics, with any upbeat trade likely to lift the increasingly risk-sensitive pound against its safer rivals.
However, GBP may remain largely subdued as investors await key UK inflation data and the Bank of England’s (BoE) monetary policy update, due for release mid-week.