Pound US dollar (GBP/USD) unmoved by Fed’s preferred inflation measure
(Updated 16:45, 28/06/24) The pound US dollar (GBP/USD) exchange rate has continued to trade in a narrow range throughout this afternoon’s European session following the publication of the latest US core PCE price index.
The Federal Reserve’s preferred gauge on inflation cooled from 2.8% to 2.6% in May which saw markets up their Fed interest rate cut bets, ultimately undermining the US dollar (USD).
James McCann, Deputy Chief Economist at abrdn, comments:
‘Following an alarming acceleration at the start of the year we continue to see signs that inflation in cooling again.’
The pound (GBP) has also continued to tread water this afternoon as this morning’s upbeat GDP reading continues to have little impact on the currency.
At the time of writing, GBP/USD is trading at around $1.2642, virtually unchanged from today’s opening levels,
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Pound US dollar (GBP/USD) exchange rate flat despite optimistic UK data
The pound US dollar (GBP/USD) exchange rate is trapped in a narrow range this morning following the publication of the UK’s finalised GDP reading for the first quarter of the year.
At the time of writing, GBP/USD is trading at around $1.2637, virtually unchanged from this morning’s opening levels.
Pound (GBP) unmoved by upbeat GDP
The pound (GBP) is treading water against the majority of its peers this morning despite an upward revision to Q1’s finalised GDP reading.
The UK economy grew faster than expected during the first quarter of 2024, as the index was revised from a previous estimate of 0.6% up to 0.7%, the strongest pace of growth since the last quarter of 2021.
Neil Shah, Director of Research at Edison Group, commented:
‘The latest UK GDP data shows that Britain’s economy grew quicker than expected in the first quarter of the year, expanding by 0.7% from the previous quarter…
‘These figures show that the UK economy is slowly starting to turn corner, confirming that the Britain’s economy exited a shallow recession at the start of 2024. Albeit slow, the economy has increased in the latest quarter following two consecutive quarters of negative growth and is slowly showing signs of a bounce back despite significant headwinds.’
However, despite this, the pound has struggled to garner investor attention as a cautious market mood weighs in the increasingly risk-sensitive currency.
US dollar (USD) subdued ahead of high-impact data
The US dollar (USD) is trading sideways against the majority of its peers this morning as US investors refrain from placing any aggressive bets ahead of some significant domestic data.
Scheduled for release this afternoon, the Federal Reserve’s preferred indicator for inflation, the core PCE price index is forecast to fall from 2.8% to 2.6% in May.
Markets are currently pricing in the next Fed interest rate cut to arrive in November, but will confirmation of a slowdown in US inflation lead markets to bring forward their bets for a September cut, and in turn dent the ‘Greenback’ today?
GBP/USD exchange rate forecast: US data in the Spotlight
Looking past the core PCE price index, the primary driver of movement for the pound US dollar exchange moving into early next week will likely be the latest US ISM manufacturing PMI.
The index is expected to remain in contraction territory (a score of below 50), but show that activity in the factory still improved this month. Should Monday’s data exceed expectations, this could see the US dollar start the week on the front foot.
Turning to the Pound, UK data will remain scarce at the beginning of next week, however, Sterling is likely to experience movement in the latter stages of the week.
With the UK’s general election taking place on Thursday, any unexpected results could infuse significant volatility into the Pound at the end of the week.