Pound US dollar (GBP/USD) edges lower amid easing UK grocery prices
The pound US dollar (GBP/USD) exchange rate is slipping this morning following news of cooling UK shop inflation.
At the time of writing the GBP/USD exchange rate is trading at around $1.2728, down approximately 0.2% from this morning’s opening rate.
Pound (GBP) falters amid easing grocery inflation
The pound (GBP) is facing headwinds this morning amid news that UK grocery inflation has fallen to a multi-year low.
Data from the market research firm Kantar shows that grocery inflation has eased again in May, falling to 2.1%. The data underpins market projections that wider UK inflation is rapidly approaching a level which will enable the Bank of England (BoE) to begin comfortably lowering interest rates.
However, despite easing price pressures, the UK’s cost-of-living crisis continues to weigh heavily on British consumers, which may be further fuelling GBP’s losses this morning.
Fraser McKevitt, Head of Retail and Consumer Insight at Kantar, commented:
‘The cost-of-living crisis isn’t over – far from it. 22% of households say they’re struggling, meaning that they aren’t able to cover their expenses or are just making ends meet.’
With British headline inflation set to dip to 2% tomorrow, landing on the BoE’s 2% target rate, investors remain reluctant to place any aggressive bets on Sterling amid lingering expectations that the central bank will shortly be pushed towards easing monetary policy.
Meanwhile, a mixed market mood is further limiting the increasingly risk-sensitive pound’s upside potential, making for a weak start to this morning’s session.
US dollar (USD) edges higher amid reduced rate cut bets
The US dollar (USD) is hovering around a five-month high this morning ahead of this afternoon’s latest retail and industrial production data.
In the interim, hawkish remarks from Federal Reserve policymaker Patrick Harker serve to lend the ‘greenback’ some support.
Harker reiterated the central bank’s data-driven approach, stating that further proof of consistent US disinflation would be necessary before the Fed could adopt a less restrictive stance towards its monetary policy.
Though Harker is often seen to be one of the more dovish voices amongst the Fed’s rate-setters, he commented:
‘In my view, this calls for a cautious approach. I think one rate cut would be appropriate by year’s end.’
As policymakers continue to advocate for rate cuts towards the end of the year, USD continues to attract investor support prior to this afternoon’s macroeconomic releases.
Pound US dollar exchange rate forecast: US retail sale to lift the ‘greenback’?
Looking ahead, the latest US retail sales data is due for release this afternoon. Economists forecast a 0.2% increase in retail activity throughout May, following a period of stagnant spending in the month prior. Should the data print as forecast, a modest rebound the US retail sector may underpin USD’s morning gains.
Looking to the UK, a data-light session may leave Sterling rudderless ahead of tomorrow’s high impact releases.