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Pound US Dollar Exchange Rate Forecast: GBP/USD to Slide as Market Mood Sours?

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Pound US Dollar (GBP/USD) Exchange Rate Fluctuates on UK GDP and Risk-Off Mood

The Pound US Dollar (GBP/USD) exchange rate wavered this morning. News that the UK economy avoided a recession cheered Sterling investors, but a souring market mood capped any gains for the currency pairing.

At the time of writing, GBP/USD is trading at around $1.2108, having wobbled in a narrow range this morning.

Looking forward, could a souring market mood and hawkish Federal Reserve comments see the Pound US Dollar pair end the week on a sour note?

Pound (GBP) Wavers amid Mixed GDP Report

After an initial rise this morning following the UK’s latest GDP data, the Pound (GBP) then stumbled.

Although the British economy avoided a technical recession at the end of 2022, December showed a larger-than-forecast economic contraction. Meanwhile, some economists have said that the outlook remains ‘bleak’.

As the session continues, Sterling could continue to waver in a narrow range as markets digest the mixed GDP report.

In addition to GDP, UK data showed a strong and unexpected improvement in business investment, which may prevent heavy losses for the Pound.

US Dollar (USD) Subdued despite Risk Aversion

Turning to the US Dollar (USD), the safe-haven ‘Greenback’ is struggling to strengthen today, despite a souring market mood.

Tensions in the Russia-Ukraine war are heating up, as Russian forces launched a ‘massive’ wave of missile strikes across Ukraine. Ukraine claims two missiles passed through Romanian and Moldovan airspace on their way from a Russian ship in the Black Sea into Ukraine, prompting fears of an escalation.

If the market mood remains downbeat, then the safer US Dollar could begin to gain ground against the riskier Pound. Any fresh signs of escalation could sour the mood further, potentially adding to USD’s gains.

Later today, the preliminary US consumer sentiment reading from the University of Michigan is due out. Economists expect a modest uptick this month, which may help the ‘Greenback’ climb higher.

In the evening, two Federal Reserve policymakers are due to speak. If they both voice their support for further interest rate hikes then GBP/USD may face steeper losses.

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