Pound US dollar (GBP/USD) strengthens amid cheery trade
Article updated 14:00, 07/08/2024
The pound US dollar (GBP/USD) exchange rate is edging higher this afternoon amid an ongoing recovery in market sentiment.
The increasingly risk-sensitive pound (GBP) enjoys some investor support against its rival, the safe-haven US dollar (USD), as upbeat trading conditions permeate global markets amid a data-light session.
Fawad Razaqzada, market analyst at City Index and FOREX.com, commented:
‘With the economic calendar also being light, investors are making a more sober assessment of the events over the past week or so and are realising that there may have been a bit of an overreaction to the Bank of Japan’s larger than expected policy tightening last week that triggered all the volatility as investors were forced to unwind carrying trades.
That’s not to say we are completely out of the woods just yet. But there’s at least some stabilisation in the markets, which should allow some markets to re-align with the fundamentals.’
Looking ahead, could further signs of a deteriorating US labour market pressure the ‘greenback’ tomorrow afternoon?
At the time of writing, GBP/USD is trading at around $1.2726, up approximately 0.2% from today’s opening levels.
Original article continues below:
Pound US dollar (GBP/USD) exchange rate volatile amid lack of data
The pound US dollar exchange rate is trading without a clear direction this morning with fresh data in short supply.
At the time of writing the GBP/USD exchange rate is trading at around $1.2706, virtually unchanged from this morning’s opening rate.
Pound (GBP) volatile amid data-light session
The pound (GBP) is trading in a wide range against its peers amid a lack of fresh UK releases.
With data in short supply, the increasingly risk-sensitive pound finds modest support against its safer rivals as the market mood improves.
However, GBP sentiment remains largely soured by ongoing far-right riots across the UK. The riots serve to undermine an expected return to political stability under Britain’s new Labour government, thereby deterring investor interest in the pound.
While recently elected UK Prime Minister Keir Starmer assures a ‘robust and swift response’ to the racially motivated attacks, fears that as many as thirty further far-right protests could be carried out this week leave GBP on the back foot.
Meanwhile, renewed economic growth concerns continue to underpin a sharp uptick in Bank of England (BoE) interest rate cut bets today. With markets pricing in an additional two rate cuts by the end of 2024, GBP will likely remain a less favourable investment throughout the session.
US dollar (USD) wavers amid data lull
The US dollar’s (USD) brief recovery comes to a halt this morning, as upbeat trading conditions undermine the safe-haven currency.
An increasing appetite for risk coupled with a lack of fresh US data leaves the ‘greenback’ facing headwinds once again, just days after a mass global selloff.
Elsewhere, concerns that the Federal Reserve have waited too long to begin its monetary unwinding cycle continue to weigh on USD, with markets mulling over whether the bank missed an opportunity at its latest meeting. As bleak employment and wider economic data pours in, further delays to Fed interest rate cuts could be highly detrimental to the health of the US economy.
Steven Blitz, Chief US Economist at TS Lombard, is amongst those warning clients that further delays to Fed intervention could fuel US recession woes, stating:
‘In sum, no recession today, but one is increasingly inevitable by year-end if the Fed fails to act. But they will, beginning with a [half percentage point] cut in September telegraphed in late August.’
A data-light afternoon may see the ‘greenback’ continuing to trade without a clear trajectory, as cheery trade stymies USD’s upside.
Pound US dollar exchange rate forecast: US jobs data to weigh on the ‘greenback?’
Looking ahead, the latest initial jobless claims report is de for release in the US tomorrow. The number of US citizens claiming unemployment benefits is forecast to hold near an annual high, which may reinforce concerns of a deteriorating US labour market, and thereby sink the ‘greenback’.
Additionally, a speech from Fed Thomas Barkin tomorrow evening could drive USD movement, with any dovish signals likely to weigh on the US dollar.
Looking to the pound, a lack of fresh data could see unfolding civil unrest across the UK leave GBP exposed to losses.