Pound US dollar (GBP/USD) exchange rate ticks up despite lower-than-expected UK GDP
The pound US dollar (GBP/USD) exchange rate is edging higher this morning despite the publication of some underwhelming UK GDP data, as Federal Reserve interest rate cut bets are buoying the currency pairing.
At the time of writing, GBP/USD is trading at around $1.3420, up roughly 0.3% from this morning’s opening levels.
US dollar (USD) undermined by Fed rate cut speculation
The US dollar (USD) is struggling to garner investor attention this morning, and is dipping against the majority of its peers, as a rise in Federal Reserve interest rate cut bets has seen USD sentiment continue to sour.
On Friday, the US published its latest PCE price index, which stands as the Feds preferred measure on inflation.
The index cooled to 2.2% in August, confirming the slowest pace of price growth since February 2021.
This saw a rise in bets for another 50 basis-point interest rate cut from the Fed, undermining the American currency through to today’s European session.
Latet today, the Federal Reserve’s Chair Jerome Powell is expected to deliver a speech which could see the ‘greenback’ continue to retreat should he hint at the possibility of a 50bsp cut.
Pound (GBP) unmoved by GDP print
Although up against the US dollar and the Canadian dollar (CAD), the pound (GBP) is trading largely flat against the remainder of its peers this morning following the publication of the UK’s finalised GDP print for the second quarter of the year.
The index confirmed a marginal decrease from the initial estimate, with Q2’s reading dropping from 0.6% to 0.5%.
Professor Sarwar Khawaja, Chairman of the Executive Board at Oxford Business College, commented:
‘The downward revision of quarterly growth from 0.6% to 0.5% sounds like a minor book-keeping change, but it is more significant than it might appear at first glance.
It suggests that the initial optimism about the pace of economic recovery may have been slightly overstated.’
However, despite this lackluster reading, Sterling has managed to stay afloat against the majority of its peers in the wake of the release.
GBP/USD exchange rate forecast: US data to drive movement?
Looking ahead, the primary catalyst of movement for the pound US dollar exchange rate looking at tomorrow will likely be the publication of significant data releases from the US.
The latest JOLT job openings index could infuse further volatility into the ‘greenback’ tomorrow should last month’s reading confirm another fall in new job creations.
Also scheduled for release tomorrow is the US’s latest ISM manufacturing PMI which could add additional pressure onto USD exchange rates as the data is forecast io remain firmly in contraction territory (a reading below 50).
Turning to the pound, the UK will also release its latest manufacturing PMI for August, which, although is forecast to dip, is still expected to remain within the expansion zone (a reading above 50) and could offer GBP some modest support.