Pound US dollar (GBP/USD) exchange rate firms as risk sentiment improves
(Updated 15:15, 28/10/24) The pound US dollar (GBP/USD) exchange rate has strengthened today as an improving market mood lifts the increasingly risk-sensitive pound (GBP) and weighs on the safe-haven US dollar (USD).
Over the weekend, Israel launched its long-vowed attack on Iran. However, the strike – which was in retaliation for an Iranian strike on Israel at the start of the month – was more restrained than expected.
Analysts had feared that Israel might hit Iranian oil or nuclear sites, despite US President Joe Biden urging Israeli Prime Minister Benjamin Netanyahu not to target energy infrastructure. Israel instead struck military targets.
Many hope that the escalating tensions between the two regional powers will begin to ease. This is fuelling a modestly risk-on mood today.
At the time of writing, GBP/USD is trading at $1.2996, up 0.3% on the day.
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Pound US dollar (GBP/USD) exchange rate rangebound as markets await UK budget and US data
The pound US dollar (GBP/USD) exchange rate is wavering in a narrow range today as market participants look ahead to an action-packed week.
At the time of writing, GBP/USD is trading at $1.2971, having fluctuated in a narrow range since this week’s session began.
Pound (GBP) wobbles as UK budget looms
After retreating against the US dollar (USD) overnight, the pound (GBP) is regaining ground this morning thanks to an improving market mood.
However, GBP’s upside potential seems limited as the UK government’s Autumn Budget looms.
While fears of a mini-budget style meltdown have dissipated, there is still some uncertainty ahead of the announcement. The Labour government has warned of a ‘painful’ budget, with ‘difficult decisions’ being made. However, it has also tried to strike a tone of optimism, promising to ‘rebuild Britain’ and boost growth.
Analysts expect the budget to have a significant impact on the pound on Wednesday, so Sterling is relatively quiet in the run-up to its unveiling.
US dollar (USD) trims gains as mood improves
Meanwhile, the safe-haven US dollar has ceded its overnight gains as the market mood improves.
Israel’s retaliatory strike on Iran over the weekend was more limited than many had expected, fuelling hopes that the two sides can pull back from the brink of an all-out regional war.
Meanwhile, USD investors are also hesitant to place aggressive bets on the currency ahead of high-impact data due later in the week. The latest US GDP figures, core PCE price index, non-farm payrolls report and ISM PMIs are all set to be published this week. The ‘greenback’ is subdued with these releases on the horizon.
GBP/USD exchange rate forecast: pound and US dollar to remain muted?
Looking ahead, market-moving data is thin on the ground today, with only the latest distributive trades survey from the Confederation of British Industry due out. This report may have a negligible impact on the pound as GBP investors await Wednesday’s budget.
Tuesday brings the US Job Openings and Labor Turnover survey (JOLTs) for September. Another stronger-than-expected reading could boost USD.
Meanwhile, risk appetite might impact the pound US dollar pairing. If the market mood remains upbeat then Sterling could strengthen.
Movement could be limited, however, as investors hold back ahead of the US GDP figures and UK budget on Wednesday.