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Pound Sterling US Dollar (GBP/USD) Exchange Rate Falls despite Calls for September Fed Rate Cut

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Pound US Dollar (GBP/USD) Exchange Rate Slides on Surprise Increase in US Inflation

The Pound Sterling US Dollar (GBP/USD) exchange rate slumped and the pairing is currently trading at around $1.2331.

The US Dollar received an upswing of support this afternoon as data revealed US producer prices rose unexpectedly.

August’s Producer Price Index (PPI) edged up by 0.1% despite forecasts expecting prices to remain unchanged.

However, today’s inflation data is unlikely to alter market expectations that the US Federal Reserve will slash rates this month.

Thursday’s European Central Bank (ECB) interest rate decision is likely to set the tone for next week’s Fed meeting.

With markets expecting ECB policymakers to cut rates as part of a revival package, it is largely expected that the Fed will follow suit.

Sterling (GBP) Falls as Opposition MPs Demand Parliament be Recalled

Earlier this morning, the Pound steadied as markets priced in the chance Boris Johnson would take the UK out of the EU with a deal.

The Prime Minster reiterated that he would not be requesting a delay to Brexit as the UK would be leaving the EU on 31 October as planned.

Meanwhile, Sterling was hit by further Brexit pessimism as Scottish judges ruled the current suspension of parliament was unlawful.

Opposition MPs are now calling for parliament to be recalled despite the government’s insistence the suspension would continue unless the Supreme Court ruled it unlawful on Tuesday.

US Dollar (USD) Rises as US-China Trade Tensions Appear to Thaw

The Dollar edged up against Sterling despite investors flocking to riskier assets after signs ongoing US-China trade tensions appeared to cool.

On Wednesday, the Chinese Ministry of Finance stated 16 types of US products were going to be made exempt from further tariffs.

Further sparking an upswing in risk-appetite, reports suggested that as a goodwill gesture Beijing is considering increasing its imports of US agricultural products before October’s in-person trade talks.

However, China’s announcement of a waiver list is likely for more than one reason.

In a research note, ING Greater China economist, Iris Pang wrote:

‘The exemptions could be seen as a gesture of sincerity towards the US ahead of negotiations in October, but they are probably more a means of supporting the economy.

‘There are still many uncertainties in the coming trade talks. An exemption list of just 16 items will not change China’s stance. We believe that China will stand very firm in the negotiations, which will be similar to the last round of talks.

‘Our house view is that the two countries are unlikely to reach a deal this year.’

Pound US Dollar Outlook: Will Weak Inflation Leave USD Under Pressure?

Looking ahead to Thursday, the Dollar (USD) could slump against the Pound (GBP) following the release of further inflation figures.

If consumer prices are weaker than expected, the ‘Greenback’ could weaken as it could strengthen the case for further Fed interest rate cuts this year.