Pound US Dollar Exchange Rate Drops as UK Economic Uncertainty Continues
The Pound US Dollar exchange rate is slipping again today after attempting to claw back some losses yesterday. UK economic uncertainty continues to weigh on GBP exchange rates ahead of the Bank of England’s (BoE) interest rate decision tomorrow.
Doubts over the UK’s economic recovery have pushed the Pound US Dollar exchange rate down to $1.3628 – approximately 0.2% down from today’s opening levels – ahead of the BoE and Federal Reserve interest rate decisions.
Pound Slides ahead of BoE Interest Rate Decision
The UK’s energy crisis continues to weigh on GBP exchange rates and has dragged the Pound US Dollar exchange rate down recently.
Gas prices have hit record highs and CO2 shortages have threatened food and drink production and medical supplies.
While the UK government has intervened to agree a deal to restart CO2 production, concerns remain over the effect the energy crisis will have on households and businesses going into winter.
Growing worries over the UK’s economic outlook have highlighted ongoing supply chain issues and staff shortages that businesses are suffering.
Amid the ongoing economic concerns, GBP investors will look to the BoE’s latest interest rate decision on Thursday and insight into the central bank’s stance on possible economic growth worries.
While the bank’s interest rates and policy stance are expected to remain unchanged this month, the BoE’s forward guidance could provide signals on possible tightening of monetary policy.
Meanwhile, September’s services and manufacturing PMI data could also drive movement in GBP exchange rates. Private sector growth is forecast to remain in solid growth territory, although with a slowdown in manufacturing.
US Dollar Firms in Lead Up to Fed Announcement
The US Dollar is continuing to consolidate gains against the Pound today in anticipation of the Federal Reserve’s latest rate decision and Federal Open Market Committee (FOMC) announcements.
The FOMC has been meeting for the past two days and this evening’s announcement could drive significant movement in USD exchange rates.
With the recent ‘taper talk’ speculation that the Federal Reserve could reduce its bond-buying programme supporting USD exchange rates, signals of a tapering timetable could boost the US Dollar further.
However, improving market sentiment has capped US Dollar gains today. Global risk appetite increased after fears further eased over Evergrande. The Chinese property developer announced it would pay interest on bonds and the Chinese central bank injected money into the banking system, easing fears of an equity market selloff.
USD exchange rates could receive further support on Thursday as US Markit manufacturing and services PMI for September are forecast to hold firmly in growth territory, slightly above August’s figures.