Pound US dollar (GBP/USD) exchange rate fluctuates prior to US core PCE price index
The pound US dollar exchange rate is rangebound this morning as markets await the latest high-impact US inflation data.
At the time of writing the GBP/USD exchange rate is trading at around $1.3188, virtually unchanged from this morning’s opening rate.
US dollar (USD) wavers ahead of inflation release
The US dollar (USD) manages to cling onto its recent gains today in the wake of a stronger-than-forecast set of US GDP data.
However, USD investors could stand reluctant to place any aggressive bets on the ‘greenback’ through the morning, ahead of the latest American core PCE price index, due out this afternoon.
While markets continue to price in an aggressive policy-easing cycle from the US central bank, signs of stubborn US price pressures may see a slight pull back in overall policy expectations for the year ahead.
Speaking at an event last night, Fed Raphael Bostic expressed caution yesterday, deviating softly from the bank’s dovish consensus.
Bostic noted:
‘I don’t want us to be in a situation where we cut, and then we have to raise rates again: that would be a very bad outcome. If I’m going to err on one side, it’s going to be waiting longer just to make sure that we don’t have that up and down.’
With this in view, could signs of stubborn US inflation alter Fed policy expectation later today?
Pound (GBP) wobbles amid UK economic concerns
The increasingly risk-sensitive pound (GBP) is inching higher against some of its peers this morning as an improving market sentiment permeates global trade.
However, Sterling’s modest recovery may be short lived as investors continue to mull over UK Chancellor Rachel Reeves’s upcoming budget.
UK Prime Minister Keir Starmer cautioned earlier in the week that the looming budget will likely be a ‘painful’ one, reinforcing broad cost-of-living fears across UK households, and sapping appeal for the pound.
After facing losses in recent days as concerns of potentially bleak tax and spending cuts spook GBP investors, the Bank of England’s (BoE) latest consumer credit figures may further sour Sterling sentiment later today, should the data reveal further reveal slowing consumer spending.
However, market risk dynamics will likely be the core catalyst of GBP movement today amid a lack of market-moving macroeconomic releases.
Pound US dollar exchange rate forecast: Markets eye US inflation release
Looking ahead, the focus for USD investors will be the latest core PCE price index in the US. After entering into oversold conditions last week due to bets of an increasingly aggressive monetary easing cycle by the Fed, USD could extend its recent recover amid news of stickier-than-expected US inflation. The index is forecast to rise from 2.6% in June to 2.7% in July, which could potentially dampen hopes of a rapid unwinding cycle by the central bank.
Alternatively, any downward surprises to the index could once again fuel a surge in Fed rate cut bets, sinking the ‘greenback’ against its rivals,
Looking to the UK, a lack of notable data in the coming days may leave the increasingly risk-sensitive pound vulnerable to global risk dynamics. Any upbeat trade could lift Sterling against its safer peers, while gloomy trade may see the safe-haven ‘greenback’ take precedent.