Home » GBP » GBP/USD exchange rate to plunge as US inflation accelerates?

GBP/USD exchange rate to plunge as US inflation accelerates?

Stack of US Dollar banknotes

GBP/USD exchange rate muted amid minimal data

The pound US dollar (GBP/USD) exchange rate is trapped in a narrow range this morning amid a lull in impactful macroeconomic data.

At the time of writing the GBP/USD exchange rate is trading at around $1.2684, virtually unchanged from this morning’s opening rate.

Hot inflation to boost US dollar (USD)?

The US dollar (USD) is trading without a clear direction this morning amid an absence of any economic data.

However, on Wednesday, the US will release its latest inflation figures. March’s headline figure is forecast to have ticked higher last month, and is expected to rise from 3.2% to 3.4%.

Should the data confirm headline inflation accelerated this may underpin USD exchange rates if it further weakens 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 could limit any upside potential in the US dollar.

The Fed struck a notably dovish tone in the wake of its March policy meeting, which could revive bets for a June rate cut if this is reflected in the minutes.

Pound (GBP) to fall following UK GDP?

The pound (GBP) is managing to hold steady against the majority of its peers this morning as it’s underpinned by the latest retail sales monitor from the British Retail Consortium (BRC).

March’s figure skyrocketed past expectations, coming in at 3.2% rather than a more modest 1.8% expectation.

The data confirmed the highest monthly figure in over two years, and helped Sterling stay afloat on the back of hopes that the UK retail sector may be turning a corner.

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.

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 small 0.1% increase following a previous reading of 0.2%, which could see GBP exchange rates struggle as it may weaken expectations for a strong rebound for the UK economy following last year’s recession.

Comments are closed.