Pound US Dollar (GBP/USD) Exchange Rate Drops as GDP Pessimism Mounts
The Pound US Dollar (GBP/USD) is experiencing negative trade so far today following the Bank of England’s announcement of further emergency intervention in the UK bonds market.
At the time of writing, the GBP/USD exchange rate is trading at roughly US$1.1051, which is around a 0.2% drop from the morning’s opening rates.
Pound (GBP) to Weaken if UK GDP Stagnates
The Pound (GBP) could face headwinds on Wednesday as the GDP figures for August are published.
August’s figures are forecast to report UK economic growth slowed from 0.2% to a flat 0%, likely fuelling speculation domestic growth will contract in the third quarter.
However, the Bank of England (BoE) is due to continue their emergency intervention initiative, with the Bank of England Governor Andrew Bailey due to deliver a speech this evening. This could help bolster the Pound ahead of tomorrow’s GDP release, should he give a clearer indication of the BoE’s policy on interest rates and bond buying, or even suggest an extension to the current measures.
Ultimately, the Pound’s room for growth may be capped by the continuing uncertainty of the market due to a lack of fiscal policy clarity from the UK government, and with the continuing cost-of-living crisis affecting the populace.
US Dollar (USD) to Strengthen with the Release of the FOMC Minutes?
The US Dollar is likely to see gains through today and tomorrow, as Wednesday sees the publication of the anticipated FOMC meeting minutes.
These minutes may back up the hawkish rhetoric many Federal Reserve speakers have employed and encourage investors to support the safe-haven ‘Greenback’.
Furthermore, as the situation in the Ukraine-Russia conflict continues to remain uncertain, USD may see further gains as the European economy continues to struggle.
Even further afield, should the current risk-off market mood continue through the week, the safe-haven currency may enjoy even more support from investors as other riskier currencies remain unappealing.
This is compounded by the continuing loom of a global recession, as indicated by the International Monetary Fund, who predicted that more than a third of the global economy will contract by the end of 2023.
As such, the safety of the ‘Greenback’ may be a strong draw for investors throughout the turbulent week ahead.
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