Pound US dollar (GBP/USD) exchange rate softens amid risk-off trade
(Updated 15:40, 08/11/24) The pound US dollar (GBP/USD) exchange rate slipped through today’s session as a souring market mood weighs on the increasingly risk-sensitive pound (GBP) and supports the safe-haven US dollar (USD).
In addition, the ‘greenback’ is drawing strength from the latest US consumer confidence report from the University of Michigan. The data beat forecasts, with household morale improving more than expected in November to hit a seven-month high.
Meanwhile, GBP investors largely brushed off some comments from Bank of England (BoE) Chief Economist Huw Pill. Pill said that BoE policymakers must ‘look through’ the short-term inflationary effects of the recent Autumn Budget, instead focusing on the ‘underlying and more persistent components of inflation’ when deciding on monetary policy.
At the time of writing, GBP/USD is trading at $1.2934. While this is down almost 0.4% on the day, it’s virtually unchanged from the start of the week.
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Pound US dollar (GBP/USD) exchange rate wavers as markets normalise
The pound US dollar (GBP/USD) exchange rate is wavering today, with the pairing posting very modest losses so far, as a mixed mood prevails in the wake of the recent UK and US interest rate decisions.
At the time of writing, GBP/USD is trading at $1.2962, down less than 0.2% on the day.
Pound (GBP) stabilises following volatility
The pound (GBP) is mixed this morning, with the UK currency seemingly starting to stabilise after a rather volatile few days.
After slumping in the wake of Donald Trump’s victory in the US presidential election, Sterling rallied yesterday as the Bank of England (BoE) cut interest rates but signalled that further cuts would be gradual.
Following this, the pound is levelling out today. While concerns about the impact of a Trump presidency on the UK economy are pressuring GBP, the prospect of higher UK interest rates is making the currency more attractive.
Meanwhile, an uncertain market mood is adding to the increasingly risk-sensitive pound’s unclear direction.
US dollar (USD) steady in wake of recent events
At the same time, the US dollar (USD) is also trading in a relatively narrow range today following the excitement earlier in the week.
With the dust settling after the US election and last night’s Federal Reserve interest rate decision, trade in the ‘greenback’ is normalising.
The Fed opted to cut interest rates by 25bps, as expected, but was tight-lipped with its forward guidance. Analysts are split over whether the US central bank will cut again in December, and the uncertainty of a Trump presidency made it harder to predict future policy decisions.
The mixed market mood currently characterising trade is adding to USD’s muted movement. Although with sentiment slightly more risk-off than -on, the safe-haven currency is avoiding losses.
GBP/USD exchange rate forecast: hawkish BoE comments to boost the pound?
Looking ahead, a speech from BoE Chief Economist Huw Pill could boost the pound in the early afternoon, as Pill is one of the more hawkish members of the bank’s Monetary Policy Committee.
If the policymaker reiterates that the bank will likely take a more gradual approach to cutting interest rates due to forecasts of higher inflation and higher growth following Labour’s Autumn Budget, Sterling could strengthen.
Later in the afternoon we have the latest US consumer confidence report from the University of Michigan, which could impact the pound US dollar pair.
Markets expect household morale in America to have improved for the fourth consecutive month in November, with the index set to hit a seven-month high. If the survey prints as forecast, USD could gain ground.