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GBP/USD Exchange Rate to Jump to New Multi-Month Highs?

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GBP/USD Exchange Rate Muted amid Lull in Data

The Pound US Dollar (GBP/USD) exchange rate is trapped in a narrow range this morning as both UK and US economic data releases are in short supply today.

At the time of writing the GBP/USD exchange rate is trading at around $1.2852, virtually unchanged from this morning’s opening rate.

Pound (GBP) to Soar as Upbeat Data Softens BoE Rate Cut Bets?

The Pound (GBP) looks poised to strengthen this week on the back of upcoming UK data.

Firstly, on Tuesday, the latest UK unemployment figures along with domestic average earnings (excluding bonuses) is scheduled for release.

Both UK unemployment and average earnings are forecast to remain unchanged, coming in at 3.8% and 6.2% respectively.

With the UK labour market being seen as a key driving factor behind UK inflation, consistent wage growth and a continually robust employment sector could see Bank of England (BoE) interest rate cut bets fade, and in turn lift GBP exchange rates.

On Wednesday, UK GDP for January is expected to increase, rising from December’s 0.1% contraction to a forecast 0.2% expansion.

Should the data confirm that the UK economy returned to growth in the first month of 2024, this may help ease UK recession fears, and in turn further dampen BoE rate cut bets and boost GBP exchange rates.

US Dollar (USD) to Nosedive on Cooling US Inflation?

The US Dollar (USD) could face heavy selling pressure this week, with the release of the latest US inflation data.

Economists expect core inflation to have cooled in February, from 3.9% in January to 3.7% for this month’s reading, whilst headline inflation is expected to have held at 3.1% in the same time frame.

A slowdown in underlying inflation could place significant pressure on the US Dollar on Tuesday.as this is likely to strengthen Federal Reserve rate cut bets.

Bets that the Fed will begin cutting interest rates from June have seen the US Dollar touch multi-month lows in recent days and these could be refreshed tomorrow if there are further signs that inflationary pressures are easing.

On Thursday, domestic retail sales and the latest Producer Price Index (PPI) are scheduled for release.

With retail sales forecast to rebound from -0.8% to 0.7% in February, whilst February’s PPI score is expected to remain at the highest level in a five-month period, should the data match expectations, this may underpin USD exchange rates in the latter stages of the week.

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