Pound US dollar (GBP/USD) exchange rate rebound cut short by positive US data
(Updated 16:20, 17/10/24) The pound US dollar (GBP/USD) exchange rate attempted a recovery today, only to be cut down by upbeat US retail sales data.
After wavering near a two-month low this morning, GBP/USD then tried to recoup some of the ground it lost yesterday in the wake of the UK’s weaker inflation reading. A modestly upbeat market mood favoured the increasingly risk-sensitive pound (GBP) against the safe-haven US dollar (USD), allowing the pairing to climb as high as $1.3023 – a 0.3% rise from the start of the European session.
However, stronger-than-expected US retail data derailed the pound’s recovery. American sales growth printed at 0.4% last month, up from 0.1% and above forecasts of 0.3%. This boosted the ‘greenback’, thereby slashing GBP/USD’s gains.
At the time of writing, the pairing is trading at $1.2998. While this is modestly up on the day, it is still sharply lower than it was before Wednesday’s UK consumer price index.
Attention now turns to the UK’s own retail sales figures. Could a 0.3% contraction in September see Sterling fall once again?
Original article continues below:
Pound US dollar (GBP/USD) exchange rate licks wounds following UK CPI
The pound US dollar (GBP/USD) exchange rate is stuck wavering near a two-month low this morning, as yesterday’s cooler UK inflation print keeps Sterling subdued.
At the time of writing, GBP/USD is trading at $1.2987, virtually unchanged from this morning’s opening level.
Pound (GBP) struggles amid BoE rate cut bets
The pound (GBP) remains wounded today, with Sterling unable to recoup losses following yesterday’s selloff.
The sharp decline in the pound on Wednesday was due to a weaker-than-forecast UK consumer price index. British inflation eased from 2.2% to 1.7%, lower than the expected 1.9% and below the Bank of England’s (BoE) 2% target.
This has fuelled bets that the BoE could cut interest rates consecutively in both November and December, which is maintaining pressure on the pound today.
Furthermore, uncertainty ahead of the UK government’s Autumn Budget at the end of the month is subduing the pound.
The government has said it wants to take a pro-growth approach, while also warning of difficult decisions on tax and spending. This mixed messaging is putting the pound on uneven footing.
US dollar (USD) rangebound amid mixed market mood
Meanwhile, the safe-haven US dollar (USD) is trading in a narrow range this morning amid a lukewarm market mood.
The mixed risk appetite comes as hopes for lower global borrowing costs are offset by fears around the conflict in the Middle East.
While the prospect of the world’s key central banks cutting interest rates is cheering investors, the escalating Middle East crisis – and fears of a wider regional war – is keeping risk appetite in check.
GBP/USD exchange rate forecast: retail sales data to dent the pound US dollar pairing?
Looking ahead, the key data release due out today is the latest US retail sales report.
Economists expect American sales growth to have accelerated in September, from 0.1% to 0.3%. If the report does show a pickup in consumer spending, the ‘greenback’ could gain further ground this afternoon.
The UK’s own retail data is then due out on Friday, with the results potentially leading to more losses in the pound. British retail sales are forecast to have contracted by 0.3% last month, which could see Sterling end the week on a sour note.
Until then, GBP/USD could continue to trade flat at a two-month low. Risk sentiment could also drive movement, with any positive or negative shifts in the mood potentially boosting or denting the pairing, respectively.