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Pound US Dollar Exchange Rate to Climb Further on Easing US PPI?

Pound US Dollar

GBP/USD Exchange Rate Wavers amid Softer-than-Expected US Inflation

The Pound US Dollar (GBP/USD) exchange rate is rangebound as US inflation printed weaker-than-expected slashing rate hike bets.

At time of writing the GBP/USD exchange rate is around $1.2725, relatively unchanged from this morning’s opening levels.

US Dollar (USD) Softens amid Tempered Rate Hike Bets

The US Dollar (USD) is coming under increased selling pressure as the latest headline CPI inflation missed forecasts and accelerated at a slower pace.

Against predictions of a 3.3% increase, the first acceleration in over a year, inflation only increased by 3.2%.

‘The index for shelter was by far the largest contributor to the monthly all items increase, accounting for over 90 percent of the increase, with the index for motor vehicle insurance also contributing.

’The food index increased 0.2 percent in July after increasing 0.1 percent the previous month.’

The US Bureau of Labor Statistics (BLS) also reported today that core inflation, excluding volatile prices such as food and energy prices, eased. With both readings coming under estimates, interest rate hike expectations, souring the ‘Greenback’.

Looking ahead, the latest PPI inflation data could all but confirm a hold in the rate from the Federal Reserve. If the data points to inflationary pressures finally easing, the Fed could feel the need to hold the cash rate steady, easing demand for the safe-haven US Dollar.

Pound (GBP) Under Pressure amid Economic Uncertainty

Meanwhile, the Pound (GBP) is struggling for sustained demand as a lack of economic data left it exposed to market sentiment. However, the more pressing matter to GBP investors is the mounting uncertainty surrounding the UK economy.

Ahead of the latest economic growth data tomorrow, the Pound remains under pressure in the meantime with the shaky housing market. Another drop in house prices, this time the lowest since 2009, soaring interest rates could keep the market under pressure. Victoria Scholar, Head of Investment at Interactive Investor, said of the situation:

‘This data echoes recent reports from Nationwide and Halifax suggesting that the Bank of England’s aggressive stream of 14 consecutive rate hikes and the consequent surge in mortgage costs are sharply weighing on the housing market.’

Looking ahead to tomorrow, the latest GDP growth data could see the Pound remain under pressure if quarterly growth has stagnated as predicted. With ongoing fears of the UK stuck in ‘low trap growth’, downbeat GDP growth could send Sterling plummeting.

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