GBP/USD Exchange Rate to Climb on Upbeat Market Mood?
The Pound US Dollar (GBP/USD) exchange rate is strengthening today as improved risk appetite weighs on the US Dollar (USD).
At the time of writing the GBP/USD exchange rate is trading at around $1.1755, which is roughly up 0.5% from this morning’s opening rate.
US Dollar (USD) Struggles as Cooling US Inflation Bolsters Market Sentiment
The US Dollar is down against the majority of its peers today as yesterday’s larger-than-expected drop in US inflation continues to weigh on the currency.
Headline inflation fell from 8.2% to 7.7% in October, missing the forecast 8%. This lower-than-expected drop weighed on USD as investors scale back expectations for the Federal Reserve’s next interest rate decision.
The prospects of the Fed moderating the pace of future interest rate hikes triggered a broad market rally on Thursday, which has carried through into today’s session and extended the USD selloff.
This combined with China easing its Covid restrictions slightly triggered an increase in risk sentiment, which is still dragging on USD today.
Looking ahead to next week, the US midterm elections will finally conclude. At the time of writing both the House and Senate are still in contention. A split in either part of Congress could weaken the US Dollar as it will stymie Joe Biden’s ability to push through legislation.
Pound (GBP) to Fluctuate on Recession Concerns?
The Pound (GBP) is up against USD this morning, but struggling for support elsewhere as the UK’s GDP report dampens investor sentiment.
UK economic growth contracted by 0.2% in Q3. Whilst not as bad as expected -growth was forecast to drop by 0.5% -the data is stoking recession fears today.
This fear is also being underpinned by aggressive comments made by Jeremy Hunt, who has said difficult decisions will be needed to ‘restore confidence and economic stability’.
With this in mind, looking ahead to next week, Hunt’s much anticipated Autumn Statement will be in focus for investors.
The chancellor faces the task of restoring the Pound’s credibility, whilst easing recession fears. If investors react poorly to Hunt’s supposed plan of tax increases and spending cuts, the Pound could face headwinds.
Elsewhere, unemployment data could dent the Pound during early week trade. According to forecasts the jobless rate is expected to increase from 3.5% to 3.6% amid the UK’s cooling jobs market.
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