GBP/USD Exchange Rate Trades Sideways ahead of Key Data
The Pound US Dollar (GBP/USD) exchange rate is muted at the start of this week, as investors brace for the UK’s latest inflation figures on Wednesday.
At the time of writing the GBP/USD exchange rate is trading at around $1.3095. Virtually unchanged from this morning’s opening rate and trading just below the 15-month high struck last week.
Pound (GBP) to Jump on Strong UK Inflation Figures?
The UK’s latest consumer price index is likely to trigger some dramatic movement in the Pound (GBP) later this week.
June’s CPI figures will be closely watched by GBP investors after May’s figures led to speculation UK interest rates could peak above 6%.
Consensus forecasts predict UK headline inflation will have cooled from 8.7% to 8.2% last month. While core inflation is expected to have held at 7.1%.
However, the UK’s CPI releases have regularly outpaced expectations in recent months. And another hotter-than-expected inflation print in June certainly can’t be ruled out.
Another strong inflation reading is likely to further reinforce Bank of England (BoE) interest rate expectations.
Rising BoE rate hike bets could push the Pound higher and catapult the GBP/USD exchange rate to a new 15-month high.
However, at the same time, Wednesday’s CPI figures could trigger fresh UK recession fears. In which case Sterling could face some headwinds.
US Dollar (USD) to Rally on Upbeat Retail Sales Figures?
The US Dollar (USD) may seek to recoup some of its recent losses with the release of the latest US retail sales figures on Tuesday.
Economists predict sales growth will have accelerated from 0.3% to 0.5% in June.
Resilient consumer spending may be taken as a sign that the Federal Reserve still has some room to manoeuvre when it comes to tightening monetary policy and could buoy the US Dollar.
On the other hand, the upbeat figures may help to ease fears over global growth, in which case the ‘Greenback’ may be weakened by improving risk appetite.
In the meantime, USD exchange rates are finding some support from the publication of China’s latest GDP figures, after a smaller-than-expected increase in second quarter growth is weighing on market sentiment.