Pound US Dollar (GBP/USD) Exchange Rate Rangebound after UK GDP Data
The Pound US Dollar (GBP/USD) exchange rate is trending sideways today. A downward revision in third quarter UK GDP figures may be capping gains for the pair. On the other hand, a return of global risk appetite could be lending support to the exchange rate.
At time of writing the GBP/USD exchange rate is at around $1.2078, virtually unchanged from this morning’s opening figures.
Pound (GBP) to Edge Lower amid Poor UK Outlook?
The Pound (GBP) could continue to tick lower against many of its peers today as markets digest the third quarter GDP figures. The data was revised lower to indicate a greater-than-forecast contraction in the UK economy.
Following the figures, analysts now largely expect a 2023 recession for the UK. This poor outlook for the country’s economy could weigh on the currency and add to the Bank of England’s (BoE) downbeat forecasts.
The dovish split between BoE policymakers may also prompt reduced bets on Sterling.
The impact of the British Chambers of Commerce’s (BCC) latest business survey could also push Sterling lower over the rest of the week. Three-quarters of UK businesses told the BRC that the UK’s ‘oven-ready’ Brexit deal had not boosted their firms.
Will US Dollar (USD) Find Support from Signs of Tight Labour Market?
The US Dollar (USD) may see further losses if risk appetite remains healthy today. The prospect of a global economic slowdown could underpin any risk-based losses however, as investors remain wary over rising Covid case levels in China.
Data releases for USD today could boost the currency later today. Initial jobless claims figures are expected to remain close to previous highs. If the data prints as forecast then it could continue to signal a tight labour market, bolstering the currency.
The final reading of third quarter GDP growth figures may also push the US Dollar higher if they print as expected. The data is forecast to confirm a recovery in the US economy in Q3.
The latest release of the PCE price index, the Fed’s preferred measure of inflation, on Friday could see USD slip though. November’s figures are forecast to indicate cooling inflation which could dent Federal Reserve rate hike bets. The Fed’s hawkish stance may limit these losses, however. The central bank has outlined its commitment to further interest rate hikes this week.