Pound US dollar (GBP/USD) exchange rate consolidates post-inflation gains
The pound US dollar (GBP/USD) exchange rate is trading near a one-year high this morning, after soaring yesterday in the wake of the latest US consumer price index.
At the time of writing, GBP/USD is trading at around $1.2931, virtually unchanged from this morning’s opening levels.
US dollar (USD) rangebound following CPI disappointment
The US dollar (USD) is struggling to garner investor attention this morning as markets continue to digest yesterday’s US inflation data.
Headline inflation came in at 3% in June, falling from 3.3% in May , and below market expectations it would only fall to 3.1%. Similarly, June’s core inflation figure also cooled more than expected, falling from 3.4% to 3.3%, against market expectations it would remain unchanged.
The data not only left markets pricing in a September rate cut from the Federal Reserve, with the CME’s FedWatch tool now showing an 80% consensus, but also saw investors increase their bets on multiple cuts this year.
Seema Shah, Chief Global Strategist at Principal Asset Management commented:
‘The latest inflation numbers put us firmly on the path for a September Fed rate cut. The smallest gain in core CPI since 2021 surely gives the Fed confidence that Q1′s hot CPI readings were a bump in the road and builds momentum for multiple rate cuts this year.’
Pound (GBP) holds steady following GDP
The pound (GBP) is holding steady against the majority of its peers this morning, underpinned by yesterday’s better-than-expected domestic GDP print.
In May, UK GDP beat expectations, with The Office for National Statistics (ONS) confirming that the UK economy grew by 0.4% rather than a more modest 0.2% expectation.
Hawkish remarks from Bank of England (BoE) Chief Economist Huw Pill earlier in the week coupled with optimism surrounding the new UK government is buoying Sterling sentiment.
GBP/USD exchange rate forecast: US data to drive movement?
Looking ahead to this afternoon, movement in the pound US dollar exchange rate is likely to be driven primarily by a duo of impactful data releases from the US.
The latest US PPI data for June is forecast to report a 0.1% rebound, and could support USD in the second half of the day as a rise in producer prices may bolster inflation expectations in the coming months.
Also scheduled for release this afternoon is the preliminary Michigan consumer sentiment index for July. Will an expected uptick in morale underpin USD further?
In the meantime, will GBP optimism allow the pound to extend its bullish run into the weekend?