GBP/USD Exchange Rate Steady Ahead of US CPI
The Pound US Dollar (GBP/USD) exchange rate is rangebound so far this morning as markets await the publication of the latest US inflation figures later this afternoon.
At the time of writing the GBP/USD exchange rate is trading at around $1.2621. Virtually unchanged from this morning’s opening rate.
US Dollar (USD) Poised to Drop if Core Inflation Cools
The US Dollar (USD) looks set to face considerable headwinds this afternoon with the publication of the latest US consumer price index.
Today’s figures could drive significant movement in USD exchange rates amid uncertainty over the Federal Reserve’s next interest rate decision.
The statement which followed the Federal Reserve’s rate decision last week appeared to indicate the bank is nearing the end of its hiking cycle. In contrast, Fed policymaker John Williams said on Tuesday that the ‘Fed has not said it’s done raising rates.’
Michael Hewson, chief market analyst at CMC Markets UK, comments:
‘April’s CPI numbers are the next key benchmark feeding into whether the next meeting will see the Federal Reserve hit the pause button and keep rates unchanged after several meetings of consecutive hikes.’
April’s CPI figures are expected to report that while headline inflation held at 5%, core inflation dipped from 5.6% to 5.5%.
Could this slowing of core inflation reinforce speculation the Fed is ready to hit pause on interest rates and pull the US Dollar lower this afternoon?
Pound (GBP) to Rally on Hawkish BoE Rate Decision?
The Pound (GBP) is currently in a holding position ahead of an imminent interest rate decision from the Bank of England (BoE). The BoE will conclude its May policy meeting on Thursday.
The BoE is poised to deliver its 12th consecutive rate hike this month, with analysts expecting another 25bps increase from the bank.
With the 25bps hike largely priced in any subsequent movement in the Pound is likely to be primarily driven by BoE’s forward guidance.
Analysts had previously forecast the BoE would bring an end to its hiking cycle in May.
However, April’s stubbornly high inflation reading could push the BoE to signal it will leave the door open to more hikes in the future. A move which could propel the Pound sharply higher in the second half of the week.
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