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Could Pound US Dollar (GBP/USD) Exchange Rate be Pulled Lower by Dovish BoE Pivot?

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Pound US Dollar (GBP/USD) Exchange Rate Falls amid Risk-Off Mood

The Pound US Dollar (GBP/USD) exchange rate is dropping today. A retreat in global risk appetite may be weighing on the pairing. Market bets on further interest rate hikes from the Federal Reserve may also be pulling GBP/USD lower.

Will Pound (GBP) Fall Further if Markets Continue to Pare Back BoE Bets?

The Pound (GBP) could come under further pressure today following a speech from Bank of England (BoE) Chief Economist Huw Pill. Following Governor Andrew Bailey’s cautious comments on Wednesday, markets will be watching for any signals regarding the BoE’s forward policy. A dovish tilt could push GBP lower.

Any additional shifts in Bank of England rate hike expectations could drive further movement in GBP this week. Markets have already pared back bets after Bailey’s dovish rhetoric.

On the other hand, Sterling could find support from the latest services sector PMI figures on Friday. The final reading of February’s services PMI is expected to confirm a return to growth for the sector. The signs of increased consumer demand could also bolster optimism in the UK economy.

GBP’s movements could also be driven by any developments surrounding the UK-EU Northern Ireland trade deal.

Will Positive Signs from US Services Sector Boost US Dollar (USD)?

The US Dollar (USD) could see further gains today if the latest jobless claims figures print as forecast. Claims for the week ending Feb 25 are expected to remain close to previous lows. The evidence of a persistently tight labour market could prompt further bets of Federal Reserve rate hikes, which could in turn push USD higher.

A speech from Fed policymaker Christopher Waller overnight could further bolster the US Dollar. Waller has been hawkish in the past, and similar rhetoric could boost USD.

Friday will see speeches from a range of other Fed board members. Of note are Michelle Bowman and Tom Barkin who have signalled their support for further rate hikes in the past. If they maintain this stance, it could push the US Dollar higher.

Also on Friday, the latest ISM PMI for the US services sector could see the US Dollar rise if it prints as forecast. The PMI is expected to remain in positive territory in February. The evidence of further resilience in the US economy could also bolster hopes of a soft landing.

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