Pound US dollar (GBP/USD) fluctuates amid lull in data
The pound US dollar exchange rate is rangebound this morning amid an absence of fresh macroeconomic data in both the US and the UK.
At the time of writing the GBP/USD exchange rate is trading at around $1.3147, up approximately 0.2% from this morning’s opening rate.
Pound (GBP) wobbles amid lack of UK releases
The pound (GBP) is struggling to edge higher this morning amid a data-light end to the week in the UK.
As a result, an absence of fresh British releases leaves investors reluctant to place any aggressive bets on the pound as recent concerns over UK growth and spending weigh on GBP exchange rates.
The Office for Budget Responsibility (OBR) warned yesterday that UK debt could triple over the next 50 years as the climate crisis and security risks pose new challenges to the economy.
An excerpt from the OBR’s report reads:
‘Public finances are now under growing pressure from ageing populations, disappointing economic growth, a warming planet, and rising geopolitical tensions. Amid these pressures, many governments have struggled to rebuild their fiscal resilience during the increasingly brief interludes between global crises.
In practice, if these pressures and shocks were to materialise as we project, then governments would need to take mitigating policy action to prevent this debt spiral from occurring.’
Additionally, a weaker-than-expected GDP release this week appears to cast a shadow over Sterling as the week draws to a close, leaving GBP to trade without a clear trajectory against its peers.
US dollar (USD) falls amid rising Fed rate cut bets
The US dollar (USD) is retreating this morning as firming Federal Reserve interest rate cut bets sap appeal for the ‘greenback’.
In the wake of yesterday’s weaker-than-expected employment data, further signs of a deteriorating US labour market serve to solidify market expectation that the central bank will deliver its first interest rate reduction this month.
While markets continue to mull over whether a cut of 25 basis points or 50 basis points is more likely, investors and analysts alike appear confident that the Fed will begin its long-awaited monetary unwinding cycle this month.
According to the CME FedWatch Tool, there is a 59% chance that the Fed will enact a less aggressive quarter-point rate reduction next week, and a 41% probability of a more aggressive move.
With fresh US data running thin on the ground today, it is likely that these expectations will leave USD to hobble near recent lows as markets brace for next week’s key policy meeting.
Pound US dollar exchange rate forecast: upbeat trade to sink the ‘greenback’?
Looking ahead, a data-light start to the week could leave the pound US dollar exchange rate vulnerable to global risk dynamics. The increasingly risk-sensitive pound may find support in an improving market mood, while risk-averse trade may enable the safe-haven ‘greenback’ to take precedent.
Meanwhile, as investors await the Fed’s imminent interest rate decision, due on Wednesday, USD may remain on the back foot.