Pound US Dollar (GBP/USD) Exchange Rate Bolstered by Risk-On Mood
The Pound US Dollar (GBP/USD) exchange rate is making steady gains today. A return of global risk appetite may be bolstering the pairing. A pairing back of bets on further interest rate hikes from the US Federal Reserve could also be supporting the exchange rate.
Could Pound (GBP) Come Under Pressure from Bailey Testimony?
The Pound (GBP) could come under pressure from comments by Bank of England (BoE) Governor Andrew Bailey today. Bailey is speaking in front of the UK’s Treasury Committee as well as other BoE policymakers.
Bailey’s already-reported comments could have a mixed effect on GBP. On the one hand, Bailey stated that the BoE expected inflation to ‘come down rapidly this year’. Expectations of cooling inflation could dent rate hike bets and pull GBP lower.
On the other hand, Bailey also signalled that the UK’s labour market remained tight. The prospect of further policy tightening fuelled by the UK’s labour market could lend support to Sterling today.
Looking ahead, December’s GDP figures on Friday are forecast to indicate a contraction in the UK’s economy. The data could dent confidence in the Pound.
Growth data for the fourth quarter of 2022 could provide a boost to Sterling, however. Growth is forecast to have stagnated, meaning the UK will have dodged a technical recession.
Will US Dollar (USD) Find Support from Jobless Claims?
The US Dollar (USD) is falling today. The safe-haven ‘Greenback’ is seeing losses as optimism returns to the markets. A downturn in US Treasury bond yields may also be weighing on USD.
Uncertainty over the Fed’s forward path could be deepening losses for the US Dollar. Markets have continued to scale back bets on further rate hikes from the Fed. Multiple policymakers have spoken in favour of smaller rate hikes this week.
The losses may be limited by support for a data-driven approach to rate hikes, however. Speaking on Tuesday, Fed Chair Jerome Powell signalled that further evidence of a tight labour market may prompt further hikes.
Investors will be looking to the latest jobless claims figures later today for evidence of labour market tightness. Claims for the week ending Feb 04 are expected to remain close to previous lows. If the data prints as forecast, it could lend support to USD.