Pound US dollar (GBP/USD) exchange rate sinks on dovish BoE
The pound US dollar (GBP/USD) exchange rate is in freefall this morning following comments from Bank of England (BoE) Governor Andrew Bailey on the future of UK interest rates.
At the time of writing, GBP/USD is trading at around $1.3114, down roughly 1.1% from this morning’s opening levels.
Pound (GBP) plunges following Bailey commentary
The pound (GBP) is plummeting against the majority of its peers this morning, down by over 1% against the US dollar (USD) and the euro (EUR), as comments from the Bank of England’s Governor Andrew Bailey have severely deterred investor attention this morning.
Speaking on the future path of UK monetary policy, Bailey explained that the BoE may have to be ‘more activist’ regarding future UK interest rate cuts.
Previously, the BoE had taken a softer approach to monetary policy than that of its American and European counterparts, however, following Bailey’s comments, money markets are now reporting an 88% chance of a cut at the central banks upcoming November meeting.
This has weighed heavily on GBP exchange rates thus far, with the increasingly risk-sensitive currency further undermined by a risk-off market mood.
US dollar (USD) supported by anxious trade
The US dollar is climbing against the majority of its peers this morning as the acutely safe-haven currency is being underpinned by a cautious market mood.
The ‘greenback’ is also being bolstered by yesterday’s better-than-expected ADP employment change, which printed well above market expectations.
USD could remain on its upward trajectory this afternoon as the latest US ISM services PMI is forecast to report a marginal uptick in this month’s reading, which could offer USD exchange rates some modest support should the data print as expected.
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 Friday will likely be the publication of the latest US jobs data, scheduled for release on Friday afternoon.
The highly watched non-farm payrolls index is forecast to report a marginal downturn in the number of jobs added to the US economy this month, with the index expected to slow from 142,000 to 140,000.
The latest employment rate is expected to remain unchanged at 4.2% this month, close to a three-year high of 4.3%, and could further undermine the ‘greenback’ at the end of the week.
Turning to the pound, UK data will be thin on the ground which may leave GBP exchange rates vulnerable to an upcoming speech from Bank of England official Huw Pill.
Should Pill echo Bailey’s comments from this morning, it is likely that Sterling will remain on the back foot and close the week dipping against its peers.