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Pound US Dollar Exchange Rate Muted as UK Growth Slows Drastically

Pound US Dollar

Pound US Dollar (GBP/USD) Exchange Rate Subdued as UK Growth Disappoints

The Pound US Dollar exchange rate has traded within a narrow range today, as expectations of an early interest rate rise by the Federal Reserve pushed the US Dollar up whilst Sterling faced an uphill battle in the face of new Covid restrictions and disappointing growth data.

At time of writing the GBP/USD exchange rate is at around $1.3209.

Pound (GBP) Struggles to Gain Ground as UK Growth Slows

The Pound has struggled to make ground against its competitors today after GDP figures released today showed a significant slowdown of economic growth.

Figures released by the Office for National Statistics (ONS) showed a rise of just 0.1% in October, well below forecasts of 0.4%. Analysts and business leaders are concerned that the slow growth, coupled with the newly implemented Covid-19 restrictions, could cause further harm to already struggling businesses. Alpesh Paleja, CBI Lead Economist, had the following to say on the figures from October:

‘Growth disappointed in October, reinforcing concerns about the resilience of the UK’s economic recovery to the Omicron variant and the impact of further restrictions. We need to create consistency in our approach and build confidence by reducing the oscillation between normal life and restrictions as we learn to live with the virus and its variants.’

The data is also likely to further reduce chances of an early interest rate rise by the Bank of England (BoE) at their meeting on Thursday. The central bank has surprised investors before, but if interest rates remain unchanged then expect a selling-off of Sterling by investors.

Sterling could also see further Brexit headwinds today as France awaits a response from the UK over fishing rights. Relations between the two nations continues to be strained as French President Emmanuel Macron today accused the UK of failing to keep its word on Brexit and fishing rights.

US Dollar (USD) Climbs as Inflation Hits Highest Point since Reagan

The US Dollar has slowly risen against its rivals today, as the country’s highest rate of inflation since 1982 placed further pressure of the Federal Reserve to taper bond-buying and raise interest rates early. This comes ahead of the Fed’s next meeting on 16 December.

The 6.8% year-on-year jump in the country’s consumer price index has largely been attributed to the ongoing high cost of energy, the rise in fuel prices, and a rising cost of food attributed to supply shortages.

A tightening labour market has also placed additional pressure on the Fed to wind down its stimulus measures ahead of schedule. Investors were quick to pick up on this, and speculative bets helped boost the US Dollar following the post-data slide.