Pound US dollar (GBP/USD) exchange rate slumps amid USD strength
(Updated 17:10, 21/10/24) The pound US dollar (GBP/USD) exchange rate plunged this afternoon amid broad-based strength in the US dollar (USD).
The safe-haven ‘greenback’ climbed amid a souring market mood as the crisis in the Middle East rattled investors. While the conflict rages on, with Israel intensifying its attacks on Lebanon, many analysts are fearful of further direct attacks between Israel and Iran.
Israel is yet to retaliate for Iran’s missile strike at the beginning of the month. Speculation that Israel may strike Iranian nuclear facilities has led some in Tehran to advocate developing the ‘deterrent’ of nuclear weapons.
Meanwhile, the US dollar is also being boosted by rising US Treasury yields. As markets pare back bets on a fast pace of policy loosening from the Federal Reserve, USD is garnering support.
At the time of writing, GBP/USD is trading at $1.2981, down over 0.5% on the day.
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Pound US dollar (GBP/USD) exchange rate weakens as sentiment sours
The pound US dollar (GBP/USD) exchange rate is trending lower today as worries about the crisis in the Middle East contribute to a risk-off market mood.
At the time of writing, GBP/USD is trading at $1.3024, down 0.2% on the day.
Pound (GBP) struggles amid gloomy market mood
The pound (GBP) has stumbled this morning as a lack of UK economic data leaves GBP exposed to losses.
Without anything to lend Sterling support, the increasingly risk-sensitive currency is being pressured by a risk-averse market mood.
In addition, some anticipation ahead of next week’s Autumn Budget could be limiting the pound’s appeal. The budget has been the source of intense speculation over the past few weeks, with reports that the Treasury’s plans are in ‘complete disarray’ as proposed tax hikes will not raise as much as expected.
The Labour Party has been trying to reconcile what it says will be a ‘painful’ budget with its election promise of being a pro-growth government. With the budget due to be unveiled next week, uncertainty may be limiting the pound.
US dollar (USD) firms amid Middle East fears
Meanwhile, the safe-have US dollar (USD) is benefitting from the risk-off sentiment in markets.
The anxious mood comes as the crisis in the Middle East continues to deteriorate. Israel is intensifying its attacks on Lebanon and Gaza, with no signs of a ceasefire deal in sight, but it is yet to retaliate directly for Iran’s missile attack at the start of the month.
Depending on the scale and targets of Israel’s response, a retaliatory attack on Iran could further escalate the conflict.
With markets concerned about the possibility for ongoing violence in the region, anxious investors are shunning riskier assets and buying the safer US dollar.
GBP/USD exchange rate forecast: risk appetite to drive most movement?
Looking ahead, risk appetite could continue to drive most movement in the pound US dollar pair today amid a notable lack of data.
The only scheduled market events today that could impact GBP/USD are some Federal Reserve speeches. However, none of the three Fed officials speaking today is voting on policy this year, so any remarks may have a limited effect on the ‘greenback’.
Tomorrow, speculation around the Autumn Budget could impact the pound in the wake of the UK’s latest public borrowing figures. Could worries about tax hikes and spending cuts see Sterling struggle?