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GBP/USD to Drop as US Economy Expands?

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Pound US Dollar (GBP/USD) Exchange Rate Slips as Market Mood Deteriorates

The Pound US Dollar (GBP/USD) exchange rate is weakening today, amid a souring market mood. As the US Dollar is a safer asset, it is gathering support from the bearish trade impulse.

At the time of writing, GBP/USD is trading at around US$1.2125, falling by just over 0.3% from the morning’s opening rates.

GBP to Struggle amid Lack of Data?

So far today, the Pound (GBP) is softening against most major peers due to the lack of macroeconomic releases.

The lack of data impetus is leaving the increasingly risk-sensitive Sterling exposed to the downbeat market mood. The war between Hamas and Israel continues to bog down investor risk appetite, amid fears of a protracted or escalating conflict.

Similarly, the light calendar has kept the focus on the UK economic outlook, which deteriorated significantly following yesterday’s poor PMI data.

This is likely to continue through to the end of the week, as the lull in releases continues. As such, the Pound is unlikely to see much in the way of significant movement.

However, if the market mood remains downbeat, or even sours further, the increasingly risk-averse Pound could weaken against safer currencies such as USD.

Additionally, if further analysis of the UK economy paints a dismal picture, GBP investors may grow more concerned about the possibility of economic recession. This could weigh heavily on Sterling.

Strong US GDP Data to Boost USD?

Over today’s session, the US Dollar (USD) may trade quietly as investors anticipate a speech from Federal Reserve Chair Jerome Powell.

Due to speak tonight, Powell could rally support for the ‘Greenback’ if he takes a hawkish stance, or leaves the door open for future tightening.

Ahead of the speech, however, the lack of other data drivers could lead to the US Dollar trading in a limited capacity.

The core catalyst of movement is likely to come tomorrow, when the latest US GDP growth data is published.

Economists expect a stunning quarterly expansion of 4.3%, which may serve to catapult the US Dollar. Such a staunch increase could demonstrate strength in the US economy, which may in turn display room for further interest rate hikes.

However, the release could prove to be a mixed blessing. If the US economy is showing clear signs of expansion and strength, it may lift the market mood. As a safe-haven currency, the ‘Greenback’ could lose out as investors go for riskier investment opportunities.

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