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Pound US Dollar Exchange Rate to Accelerate as Slowing US Inflation Bolsters Fed Rate Cut Odds?

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GBP/USD Exchange Rate Steady Ahead of US CPI Figures

The Pound US Dollar (GBP/USD) exchange rate is currently in consolidation this morning as markets await the publication of the US Consumer Price Index (CPI) later this afternoon.

At the time of writing the GBP/USD exchange rate is rangebound this morning, with the pairing trading at $1.2736 ahead of the US CPI figures.

Slowing Inflation to Drag on the US Dollar (USD)?

The US Dollar (USD) is in the spotlight today as markets brace for the publication of the latest US CPI figures later this afternoon.

Economists currently forecast that the figures will show that headline inflation in the US slowed last month, with price growth dipping from 2% to 1.9%.

This will put inflation just outside of the Federal Reserve’s target range, potentially putting more pressure on the Federal Reserve to lower interest rates this year and dragging on the US Dollar.

However the accompanying core inflation figures may prove more supportive of USD if underlying inflation held steady at 2.1% in May as forecast.

Pound (GBP) to Face Political Hurdles?

At the same time, the Pound (GBP) also faces some downside risks today as GBP investors focus on UK politics.

Heightened political uncertainty in the UK is currently keeping a lid on Sterling sentiment as markets brace for the first ballot in the Conservative leadership election on Thursday.

The current frontrunner in the race is former foreign secretary Boris Johnson, who has pledged to take the UK out of the EU by the end of October, whether there is a deal on the table or not.

GBP/USD Exchange Rate Forecast: Rebound in US Retail Sales to Boost the US Dollar?

Looking past the US CPI Figures, the main catalyst of movement in the Pound US Dollar (GBP/USD) exchange rate through the second half of the week looks to be the release of the latest US retail sales figures.

Economists forecast that sales growth will have rebounded from -0.2% to 0.6% in May, potentially providing some lift for the US Dollar.

Meanwhile, potentially turning attention away from the Tory leadership election at the end of this week will be a speech by Bank of England (BoE) Governor Mark Carney.

Following on from Carney’s warning last month that markets are ‘underestimating’ the pace at which interest rates will rise GBP investors will be watching to see if this still holds true, or whether rising risks from Brexit and slowing global growth will lead Carney to adopt a more cautious outlook.