Pound US dollar (GBP/USD) exchange rate quiet amid lack of data
The pound US dollar (GBP/USD) exchange rate is trapped in a narrow range this morning ahead of Federal Reserve Chair Jerome Powell’s testimony later this afternoon.
At the time of writing, GBP/USD is trading at around $1.2803, virtually unchanged from this morning’s opening levels.
US dollar (USD) muted ahead of Powell speech
The US dollar (USD) is trading sideways against the majority of its peers this morning as US investors await Jermone Powell’s upcoming testimony.
Powell will testify in front of Congress later where he will likely be questioned on the Federal Reserve’s decision to keep interest rates at a twenty-year high.
Should he imply that the central bank is gearing up to loosen monetary policy, USD could slump against its peers in the second half of today’s European session.
Derek Halpenny, currency strategist at MUFG comments:
‘The recent run of weaker economic data (is) pointing to the prospect of Powell being more willing to signal the potential for rate cuts. We see the dollar as vulnerable to further selling today given the macro backdrop.’
Pound (GBP) listless amid absence of data
The pound (GBP) is treading water against the majority of its peers this morning as a data-light UK calendar sees Sterling struggle to find a clear trajectory.
However, helping to keep GBP exchange rates afloat this morning is a positive market reaction to the new UK government’s first week in office.
Yesterday, the UK Chancellor Rachel Reeves delivered her first speech, where she pushed for domestic economic growth, marginally supporting the Pound into today’s session.
Reeves said:
‘Our manifesto was clear: ‘Sustained economic growth is the only route to improving the prosperity of our country and the living standards of working people’. Where governments have been unwilling to take the difficult decisions to deliver growth — or have waited too long to act — I will deliver. It is now a national mission. There is no time to waste. Growth requires hard choices. Choices the previous government has shied away from, and it now falls to this new Labour government to fix the foundations. There is no time to waste.’
GBP investor attention will likely remain focused on Labour’s first few days in office and could lend the pound some further support if investors remain optimistic.
GBP/USD exchange rate forecast: US inflation to drive movement?
Looking past Powell’s testimony to later in the week, movement in the pound US dollar exchange rate is likely to be driven primarily by the latest US consumer price index.
Core inflation is forecast to hold steady at 3.4% in June, however, headline inflation is expected to cool from 3.3% to 3.1%.
Should the CPI data confirm a cooling in domestic inflation, this could ramp up Fed rate cut bets and undermine USD.
Turning to the Pound, the UK will release its latest month-on-month GDP reading on Thursday. Will an expected uptick in economic growth in May underpin Sterling sentiment?