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GBP/USD exchange rate to plummet following US inflation?

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GBP/USD exchange rate ticks up ahead of US inflation data

The pound US dollar (GBP/USD) exchange rate is firming this morning as markets brace for the latest US inflation data.

At the time of writing the GBP/USD exchange rate is trading at around $1.2699, up roughly 0.2% from this morning’s opening rate.

Warming inflation to boost US dollar (USD)?

The US dollar (USD) is trading without a clear direction this morning as markets await some high-impact domestic data, although a risk-on mood is keeping the safe-haven currency subdued.

Later this afternoon, the US will release its latest inflation figures. March’s headline figure is expected to have edged higher from 3.2% to 3.4%.

Should the data confirm headline inflation accelerated in March, this may lend USD exchange rates some support by further weakening bets for a Federal Reserve interest rate cut in June.

On the other hand, an expected cooling of underlying inflation, coupled with the publication of the Federal Open Market Committee (FOMC) meeting minutes later today could limit the upside potential for the US dollar.

If Fed officials strike a dovish tone regarding the loosening of monetary policy in this evening’s minutes, this may revive bets for a June rate cut, and in turn dent the ‘greenbank’ in midweek trade.

However, should Fed officials push back against imminent rate cuts, the US dollar could surge as a result.

Pound (GBP) to fall following UK GDP?

The pound (GBP) is managing to hold steady against the majority of its peers this morning despite a lack of any economic data today.

Looking at the remainder of the week, UK data will remain in short supply through the middle of the week, which may leave GBP exchange rates vulnerable to shifts in the ever-changing market mood.

Should markets continue in upbeat trading conditions, the pound could strengthen against the safer US dollar. However should the market mood sour, GBP exchange rates could start to slip.

The one data release of note this week is the UK’s latest GDP print for February, expected on Friday.

The data is forecast to report a 0.1% increase following a previous reading of 0.2%, which could see Sterling struggle to catch bids as the data may weaken expectations for a strong rebound for the UK economy following last year’s recession.

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