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GBP/USD Exchange Rate to Face Further Headwinds amid Risk Aversion?

US Dollar Currency Forecast

GBP/USD Exchange Rate to Weaken More as US Session Begins?

The Pound US Dollar (GBP/USD) exchange rate is down today as risk aversion bolsters the safe-haven ‘Greenback’.

At the time of writing the GBP/USD exchange rate is trading at around $1.1541, which is roughly down 0.2% from this morning’s opening rate.

US Dollar (USD) to Rally on Inflation Data?

The US Dollar (USD) is up against the majority of its peers this morning as risk aversion is strengthening the safe-haven currency.

This risk aversion was partially caused by the US GDP report for Q3 coming in hotter than expected yesterday. According to the report the US economy grew 2.6%, beating the forecast of 2.4% and recovering from the previous quarter’s 0.6% decline.

Turning to today, the US is expected to release their latest inflation figures. Headline inflation is expected to ease from 6.2% to 6.1%. However, the core PCE price index, which strips out volatile commodities like fuel and clothing prices and is the Federal Reserve’s preferred measure of inflation, is expected to rise from 4.9% to 5.2%.

If it prints true to forecasts, this could serve to extend USD’s gains. ‘Greenback’ investors will be expecting an aggressive interest rate hike from the Federal Reserve to tackle climbing inflation. Markets are currently pricing in a 75bps at the Fed’s next meeting.

Pound (GBP) to Remain Under Pressure amid Lack of Data?

The Pound (GBP) is struggling for support this morning as a lack of data has left investors with very little to trade on. As a result, much of the Pound’s movement today could be carried by lingering political uncertainties.

Many investors have been banking on the new Prime Minister Rishi Sunak to bring stability and credibility back to the UK. However, this hope has been dented somewhat as the fiscal plan has been delayed until mid-November.

Markets have been placated somewhat with the knowledge they will be given a full budget. Despite the upgrade, if Sunak fails to deliver a plan that seems achievable in terms of cost Sterling could become volatile.

Elsewhere, political tensions within Ireland could impact GBP. Northern Ireland is gearing up for a snap election after a recall of the Stormont assembly failed to elect a speaker and break the political deadlock.

Political developments within Ireland have weighed on Sterling before as it impacts UK trade. As such, the Pound could suffer amid Northern Ireland’s political turmoil.

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