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GBP/USD to See Volatile Trade amid Slowing US Economic Growth?

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Pound US Dollar (GBP/USD) Exchange Rate Rangebound Ahead of US GDP Data

The Pound US Dollar (GBP/USD) exchange rate is wavering this morning, as investors await the latest US GDP growth data, due this afternoon.

At the time of writing, GBP/USD is trading at around US$1.2736, showing little movement from today’s opening levels.

GDP Slowdown to Rock USD?

This morning, the US Dollar (USD) is seeing quiet trade as investors look ahead to the latest US GDP growth rate. This afternoon, data for the fourth quarter is set to be published, with the US economy forecast to have slowed from 4.9% growth to 2%.

This may inject fresh volatility into USD exchange rates after publication, as it could show that the world’s largest economy is bearing the brunt of the Federal Reserve’s tightening cycle. Furthermore, such a sharp drop in growth could bring interest rate cut bets to the forebear, and investors may price in imminent cuts from the Fed.

If this occurs, USD may weaken against its peers over the course of today’s session. However, signs of slowing economic activity may weigh heavily on the market mood, as it may have implications of slowing growth across the world. This, in turn, may strengthen the safe-haven ‘Greenback’ against riskier assets.

On Friday, the latest core PCE price index is due to print. As the Fed’s preferred gauge of inflation, this will be of significant import to investors. Economists are anticipating that core inflation cooled in December from 3.2% to 3%. If this prints accurately, USD may weaken as inflation approaches the Fed’s target rate of 2%.

Lack of Data to Limit GBP?

So far today, the Pound (GBP) has been unable to find a clear direction, as a lack of impactful data leaves the currency exposed to a muted market mood.

Due to the Pound’s increasingly risk-sensitive nature, GBP is particularly vulnerable to shifts in risk appetite. With the focus on US GDP data and geopolitical tensions in the Middle East, Sterling is unable to catch bids as investors stay at the sidelines.

This is likely to continue through to tomorrow’s trade, as data releases remain few and far between for the Pound. If the market mood remains variable, Sterling may remain quiet through to the end of the week’s session.

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