Pound US Dollar (GBP/USD) Exchange Rate Volatile ahead of Powell’s Jackson Hole Speech
The Pound US Dollar (GBP/USD) exchange rate fluctuated this morning as investors steeled themselves for Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole Economic Symposium.
Over the course of the morning, GBP/USD wavered between lows of $1.1773 and highs of $1.1842.
Pound (GBP) Pressured by Energy Crisis Fears
The Pound (GBP) came under pressure this morning after Ofgem raised the energy price cap by 80%, as expected, thereby intensifying the UK’s energy crisis.
Following the announcement, charities, economists, politicians and industry leaders have been offering their take on the price cap rise. ScottishPower CEO Keith Anderson called the situation ‘catastrophic’, while leading charity figures have warned that people could die this winter as they may be unable to afford to heat their homes.
As the day progresses, this will likely dominate movement in the Pound. Further troubling analyses of the cost-of-living crisis could weigh on Sterling, as could any ongoing rise in UK gas prices.
The UK government is facing calls from all corners to urgently announce a plan to deal with the worsening crisis. If the government comes out with a significant announcement and manages to soothe markets, Sterling may be able to recoup some losses. However, this seems unlikely.
US Dollar (USD) to Soar on Hawkish Fed Rhetoric?
Turning to the US Dollar, it could enjoy a significant upside later on as markets expect Fed Chair Powell to strike a decidedly hawkish tone during his speech this afternoon.
Powell’s speech at the Jackson Hole Symposium gives him a chance to reset market expectations and signal the US central bank’s approach for the coming year.
Most commentators believe Powell will use the opportunity to reiterate the Fed’s commitment to bringing down inflation, despite recent signs it is beginning to ease and concerns that the US economy is slowing.
If the Fed chief hints at further aggressive rate rises, and if he manages to convince markets that recent signs of an economic downturn in the US are nothing to worry about, then the ‘Greenback’ could soar.
However, if Powell disappoints USD investors by sounding less hawkish than expected, the US Dollar may drop.