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GBP/USD Exchange Rate to Keep Gaining Ground Ahead of US Inflation Data?

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Pound US Dollar (GBP/USD) Exchange Rate to Continue Climbing as US Investors Await PPI Release?

The Pound US Dollar (GBP/USD) exchange rate is making marginal gains today as the US waits for key data and the Pound (GBP) lacks impetus.

At the time of writing, the GBP/USD exchange rate is trading at around $1.2264, which is up roughly 0.3% from this morning’s opening rate.

US Dollar (USD) to Fall Post PPI Release? 

The US Dollar (USD) is trading in a broad range today. Investors are awaiting the release of November’s producer price index, which measures wholesale inflation.

Month on month, the PPI is expected to remain unchanged at 0.2%, while year on year it’s set to decline from 8% to 7.2%. Easing PPI could dampen Federal Reserve interest rate rise expectations, which in turn could push the US Dollar lower.

Looking to next week’s CPI release, headline inflation is expected to fall from 7.7% to 7.6%. Core inflation is also forecast to decline from 6.3% to 6.2%. If true, this could cause the Fed to pursue smaller interest rate hikes, which could weigh on USD.

Pound (GBP) to Strengthen amid GDP Growth Report?

The Pound (GBP) is firming today, despite a lack of data, as an improving market mood supports the riskier currency. However, GBPs gains are being limited by mixed domestic headlines.

News of the UK Treasury’s financial reforms has fallen flat this morning. These reforms will replace rules introduced to protect against another severe financial crash like the 2008 crisis. While the government hopes the plans will boost the UK’s financial services sector, some analysts believe the measures could go further while others are worried about relaxed regulations leading to increased risk.

Looking ahead to next week, the UK’s data hiatus will be broken. October’s GDP growth report is due on Monday. Economic activity is expected to grow by 0.4%, which would likely boost Sterling. However, if the data comes in lower than expected or shows a contraction, the Pound could be dented.

On Tuesday the UK will release its unemployment rate and average earnings. October’s unemployment rate is expected to increase from 3.6% to 3.7%. If this prints as true, it could dent the Pound as investors worry about further economic headwinds.

Average earnings including bonuses are forecast to increase from 6% to 6.1%. Whilst average earnings excluding bonuses are expected to increase from 5.7% to 5.8%. If these print as true Sterling could see an uptick. However, as growth still lags behind inflation its gains could be limited.

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