GBP/USD Exchange Rate Slumps as Fed Policymaker gives Hawkish Speech
The Pound US Dollar (GBP/USD) exchange rate is retreating today following Federal Reserve official John William’s hawkish comments earlier today.
At the time of writing the GBP/USD exchange rate is trading at around $1.2708. Roughly 0.4% down from this morning’s opening rate.
US Dollar (USD) Strengthens on Hawkish Fed comments
The US Dollar (USD) is rallying today following a hawkish speech from a member of the Fed’s rate setting committee.
President of the Fed’s New York branch, John Williams, said:
‘We aren’t really talking about rate cuts right now. We’re very focused on the question in front of us, which as chair [Jerome] Powell said… is, have we gotten monetary policy to sufficiently restrictive stance in order to ensure the inflation comes back down to 2%? That’s the question in front of us.’
This is in stark contrast to the dovish comments made by Fed Chair Jerome Powell following the bank’s latest interest rate decision on Wednesday. Powell’s comments stoked expectations the Fed will begin to cut rates from March.
Looking ahead, market moving data is thin on the ground for the US currency until the release of Thursday’s domestic GDP data. The final estimate of growth is expected to confirm a sizable 5.2% expansion of growth in the third quarter which may lend the US Dollar some support in the latter stages of next week.
Pound (GBP) Rallies following upbeat PMI’s
While it is on the defensive against the US Dollar, the Pound (GBP) is strengthening today against most of its other peers, after the UK’s latest PMIs were released.
December’s preliminary figures reported another expansion in the vital UK service sector.
The surveys reported:
‘UK private sector output expanded for the second month running in December, which continued a modest recovery from the downturn seen during the three months to October. Higher levels of business activity were supported by a renewed improvement in order books, alongside efforts to work through post-pandemic backlogs.’
With the better-than-expected PMI results portraying a resilient UK economy, this has lent Sterling some support today.
Looking ahead, there is limited UK data set for release until Wednesday, with the release of the UK’s consumer price index potentially acting as a headwind for the Pound if inflation continues to cool.
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