GBP/USD Exchange Rate to Climb More as Risk Appetite Weighs on the ‘Greenback’?
The Pound US Dollar (GBP/USD) exchange rate is strengthening this afternoon amid improving risk appetite..
At the time of writing the GBP/USD exchange rate is trading at around $1.1911, up roughly 0.4% from today’s opening rate.
US Dollar (USD) to Remain Pressured by Risk-On Trade?
The US Dollar (USD) is struggling for support this afternoon as risk-off flows have eased.
The upbeat mood appears to be linked to optimism over the reopening of more of China’s economy in additional to easing inflation concerns.
Despite the upbeat market mood, the US Dollar’s losses were limited by continued hawkish comments from the Federal Reserve. Minneapolis Federal Reserve Bank President Neel Kashkari says he wants more evidence that US inflation has peaked, and suggests the Fed keeps its foot on the pedal until this is clear.
With this in mind, USD investors are likely to keep an eye out for any additional comments from Fed policymakers. If they remain broadly hawkish it may force markets to reprice rate hike expectations for December.
Also coming up next week will be the latest USD US durable goods orders print on. Orders are expected to increase by 0.3% in October. If true it would be the third consecutive month of growth, which may ease recession fears amongst investors, lifting the ‘Greenback’.
Pound (GBP) to Keep Retails Sales Gains?
The Pound (GBP) is up against the majority of its peers today, bolstered by positive retails sales figures.
Retail sales were expected to rise from -1.5% to 0.3% in October. However, sales growth beat market expectations and climbed to 0.6%. This helped support the Pound amid the UK’s gloomy economic backdrop. That being said, it’s upside was limited by increasing cost-of-living and recession pressures.
Looking ahead to next week, the Pound could continue to climb on Tuesday. Public sector net borrowing is expected to drop in October. Currently at £19.25bn, forecasts suggest spending could decrease to £12.1bn. If the data prints as expected or decreases further, then the Pound could enjoy tailwinds as UK debt concerns ease amongst investors.
If the Pound does gain ground on Tuesday, then the UK’s service PMI on Wednesday could soften GBP. According to expectations the services PMI flash for November is set to drop from 48.8 to 48. This deeper contraction could feed into recession concerns and weigh on GBP. However, if the contraction is less severe, then Sterling’s losses could be minimal.