GBP/USD exchange rate rangebound following BoE decision
The pound US dollar (GBP/USD) exchange rate is nursing it’s wounds this morning following a sharp selloff on Thursday in the wake of the Bank of England’s (BoE) latest interest rate decision.
At the time of writing, GBP/USD is trading at around $1.2729, virtually unchanged from this morning’s opening levels.
Pound (GBP) continues to falter on BoE rate cut
The pound (GBP) continues to face mild headwinds against the majority of its peers, reaching its lowest levels this morning, following the BoE’s decision to cut interest rates yesterday.
5 out of the 9 policymakers were in favour of the monetary loosening, slashing rates from 16-year highs of 5.25% to 5%.
As the decision was largely on knife’s edge in the run up to the meeting, GBP has continued to face marginal selling pressure moving into today’s European session.
Further undermining Sterling sentiment this morning is a cautious market mood. As an increasingly risk-sensitive currency, GBP exchange rates are further hobbled as investors opt for safter assets.
US dollar (USD) undermined by recession fears
The US dollar (USD) is struggling to garner investor attention this morning amid reports that the world’s largest economy may be at risk of slipping into a recession.
Just two days after the Federal Reserve’s latest interest rate meeting, where the central bank enacted a widely expected interest rate hold, analysists are reporting that the central bank may have waited too long to begin loosening monetary policy.
Matt Britzman, Senior Equity Analyst at Hargreaves Lansdown, commented:
‘There are now concerns that the soft-landing scenario priced in for most of the year could be a pipe dream, and the Federal Reserve might have missed its chance to prevent an economic slowdown by not acting on rates earlier in the week. US jobs are out today, and further weakness here will simply exacerbate the current sell-off.’
Concerns surrounding the latest US data also highlights potential problems for the US, says Kyle Rodda, Senior Financial Market Analyst at Capital.com:
‘Stocks plunged following an ISM Manufacturing PMI survey which revealed a bigger-than-expected slowdown in factory activity in the States, raising the spectre of a steeper drop in economic growth. Historically, it’s when the ISM Manufacturing number falls below 43 that the US economy falls into recession.’
GBP/USD exchange rate forecast: US payrolls to apply pressure on USD?
Looking ahead to this afternoon, the US is scheduled to release its latest labour data, in the form of the non-farm payrolls.
The reading is forecast to report a fall in the creation of new jobs, with the index expected to fall from 206,000 to 175,000 in July.
Should the data mirror expectations and highlight further challenges in the US jobs sector, the ‘greenback’ is likely to dip on the back of bolstered Fed rate cut bets.
Turning to the pound, a speech from BoE rate-setter Huw Pill could infuse volatility into GBP this afternoon.
As Pill was one of the four policymakers who voted against yesterday’s rate cut, will any hawkish comments from the BoE official aid Sterling sentiment?