Pound US dollar (GBP/USD) exchange rate wavers below 30-month high
(Updated 15:35, 25/09/24) After hitting a near 31-month high last night, the pound US dollar (GBP/USD) exchange rate has retreated today amid a souring market mood. GBP/USD is currently down 0.3% on the day, having recouped some of its earlier losses.
The pullback in the pound (GBP) against the US dollar (USD) comes as the recent rally in markets gives way to risk aversion. Investors were optimistic earlier in the week, as the People’s Bank of China (PBoC) unveiled a blitz of stimulus measures for the Chinese economy.
However, this cheer has now faded, leaving investors anxious about the escalating tensions in the Middle East. Israel has intensified its attacks on Lebanon in recent days, raising fears that the near year-long conflict is expanding into a wider regional war.
This has seen investors opt for the safer US dollar rather than the increasingly risk-sensitive pound, although the monetary policy divergence between the Bank of England (BoE) and the Federal Reserve is keeping a firm cap on USD.
While there’s no further UK data scheduled for release this week, upcoming US reports could influence GBP/USD.
Tomorrow’s final estimate of US GDP growth for the second quarter may bolster the dollar, but a forecast drop in durable goods orders and a rise in jobless claims could offset any upside.
Attention may shift to speeches by Fed Chair Jerome Powell and some of his colleagues at the US central bank. If they signal that the Fed plans to lower interest rates further, it could help GBP/USD recover some of its recent losses and retest recent highs.
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Pound US dollar (GBP/USD) exchange rate softens as market sentiment sours
The pound US dollar (GBP/USD) exchange rate is pulling back this morning after hitting a near 31-month high overnight, as the recent risk-on rally in markets tapers off.
At the time of writing, GBP/USD is trading at $1.3378, down almost 0.4% on the day.
Pound (GBP) cedes ground as risk-on rally peters out
The pound (GBP) is on the back foot against the US dollar (USD) this morning as the increasingly risk-sensitive UK currency loses its shine amid a deteriorating market mood.
Earlier in the week, markets rallied in response to new stimulus measures from the People’s Bank of China (PBoC). The Chinese central bank unveiled a policy blitz, including cutting interest rates by 50bps, in an attempt to boost growth and prop up the beleaguered property market in the world’s second-largest economy.
This cheered investors around the world earlier in the session, but the riskier pound is starting to flag now that risk appetite is fizzling out.
US dollar (USD) regains ground amid risk aversion
Meanwhile, the US dollar is climbing up from its recent 31-month low against the pound today as the shift in market mood favours the safe-haven ‘greenback’.
With the optimism around the PBoC’s stimulus measures now dying down, concerns about the conflict in the Middle East are rattling investors. In recent days, Israel has intensified its attacks on Lebanon, marking a worrying escalation to the regional conflict and fuelling fears it is spilling out into a wider war.
GBP/USD exchange rate forecast: Fed speeches to derail USD?
Market risk dynamics could drive the GBP/USD exchange rate throughout today’s session amid a lack of notable economic data on both sides.
If sentiment continues to deteriorate amid anxiety around the prospect of all-out war in the Middle East, expect to see the pound lose more ground against the US dollar.
While UK data remains absent from the calendar for the rest of the week, some US releases tomorrow could impact the pairing. While the final estimate for US GDP growth in the second quarter could support the ‘greenback’, an expected slump in durable goods orders and rise in jobless claims could weigh on the currency.
The focus, however, may be on a speech from Federal Reserve Chair Jerome Powell and some of his fellow policymakers. Any hints that the US central bank intends to continue cutting interest rates may help GBP/USD recoup recent losses.