GBP/USD Exchange Rate Steady ahead of Key US Data
The Pound to US Dollar (GBP/USD) exchange rate is trading in a narrow range this morning as market brace for some high-impact US data releases.
At the time of writing the GBP/USD exchange rate is trading at around $1.2283. Virtually unchanged from today’s opening rate.
US Dollar (USD) Poised to Slump on Weak Inflation Figures
The US Dollar (USD) is currently trading close to a three-week low against the Pound (GBP) amid a dramatic repricing of Federal Reserve interest rate expectations.
The odds of the Fed hiking interest rates again before the end of 2023 have fallen off a cliff over the past couple of days. This comes after multiple Fed policymakers signaled that the recent surge in US Treasury bond yields might negate the need for further monetary tightening.
There’s the potential for this pullback in Fed rate hike bets to be reinforced with impending US inflation figures.
Thursday will see the publication of the latest US consumer price index. September’s CPI figures are expected to report a cooling of both headline and core inflation.
In the meantime, this afternoon’s producer price index is expected to show producer inflation also decelerated last month. A fall in input costs could be passed on to consumers in subsequent months and lead to a further drop in inflation.
A sustained drop in inflation might further limit the need for the Fed to continue tightening its monetary policy.
On the other hand, the US Dollar could draw some support from the publication of the minutes from the Fed’s latest policy meeting.
Fed Chair Jerome Powell struck a decidedly hawkish tone following September’s meeting. Which if echoed in the minutes could help to prop up demand for the US Dollar.
Pound (GBP) to Firm on Upbeat GDP Figures?
The Pound may be well positioned to take advantage of any weakness in the US Dollar in the second half of this week as the UK publishes its latest GDP data.
August’s growth figures are forecast to report that the UK economy expanded by 0.2% month-on-month, following a worrying 0.5% decline in July.
While the rebound will come from a position of relative weakness, which could somewhat undermine its impact, the positive growth figures could still help to ease UK recession jitters and lift the Pound.