GBP/USD Exchange Rate Slips amid Gloomy Market Mood
The Pound US Dollar (GBP/USD) exchange rate weakened today as a risk-off market mood weighed on the currency pairing.
At the time of writing the GBP/USD exchange rate is trading at around $1.2646, down over 0.3% from this morning’s opening rate.
US Dollar (USD) Uplifted by Cautious Market Mood
The US Dollar (USD) is mixed against its counterparts today, as a lack of market-moving data has left the currency trade on risk dynamics.
Today’s anxious market mood was able to lend the safe-haven currency some support against its more risk-sensitive peers, such as the Pound (GBP).
However, USD’s upside potential was limited by last week’s dovish surprise from the Federal Reserve, when the bank hinted at rate cuts as early as May 2024.
Looking ahead, data is thin on the ground until Wednesday, when the US CB consumer confidence report is set for release, with experts predicting an increase in household morale. This could lend USD some support.
On Thursday, the final domestic GDP growth rate for the third quarter is set for release, with analysists predicting an increase from 2.1% up to 5.2%. If results print as expected, these may boost the American currency in the latter stages of the week.
Pound (GBP) Drifts Lower as UK Data Absent
The risk-sensitive Pound (GBP) is ticking down today against some of its safer peers, as a lack of UK data coupled with a gloomy market mood weigh on Sterling.
While GBP faces resistance due to an anxious market mood, hawkish comments from Bank of England (BoE) policymaker Ben Broadbent may be lending Sterling some support. Broadbent appeared to echo his colleagues at the BoE in pushing back on rate cut bets.
In an earlier speech at the London Business School, Broadbent explained:
‘Given the volatility in the official estimates, and the disparity – such as it is – among the various indicators we have, it will probably require a more protracted and clearer decline in these series before the MPC can safely conclude that things are on a firmly downward trend.’
However, many traders are beginning to price in four rate cuts from the BoE in 2024, and this could also be pressuring the Pound.
Looking ahead, there is an absence of UK market-moving data until Wednesday, where the UK’s latest inflation report will be released.
It is forecast that headline inflation is set to cool, with an expected drop from 4.6% in October to 4.4% in November. Likewise, core inflation is also set to fall, from 5.7% down to 5.6%. Should we see results report cooling UK inflation, this may stymie the Pound moving forward.
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