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Pound US Dollar Exchange Rate to Climb on Fed Powell’s Speech?

US Dollar Currency Forecast

GBP/USD Exchange Rate Weakens amid UK Housing Price Collapse

The Pound US Dollar (GBP/USD) exchange rate is falling today as warnings of a tumbling housing market could push the Bank of England (BoE) into cutting interest rates.

At time of writing the GBP/USD exchange rate is around $1.1998, a 0.30% drop from this morning.

Pound (GBP) Undermined by Weakening Housing Market

The Pound is struggling for demand this morning in the wake of economic data that highlighted the stuttering retail sector and flagging housing market. The latter has seen house prices flat after registering four consecutive drops.

However, with the pace of annual price growth slowing to 1.8%, it marked the lowest rate since October 2019. Despite an unchanged figure, economists predict that the housing market could continue to slump. Danny Blanchflower, a former BoE policymaker, now a professor of economics at Dartmouth College, has warned that a collapsing housing market could see rate cuts from the central bank.

Meanwhile, negotiations between the UK and EU have reached a breakthrough over the Northern Ireland protocol. According to a senior EU official, an agreement on food and animal health checks are on the verge of being completed. If the UK can avoid a trade war with the EU, Sterling could climb.

Looking ahead, a speech from BoE Deputy Governor for Financial Stability Sir John Cunliffe could influence the pairing. Despite the speech focusing on digital currencies in the central banks, any hints towards monetary policy could limit losses for the Pound.

US Dollar (USD) Supported by Safe-Haven Flows

Meanwhile, the US Dollar (USD) is clinging onto earlier gains as a tepid market mood kept the ‘Greenback’ modestly buoyed. With US-China tensions mounting yesterday, market sentiment soured on geopolitical concerns as the US shot down the Chinese spy balloon.

However, when asked if the incident would change US-China relations, President Joe Biden simply replied ‘no’. Biden added:

‘We made it clear to China what we’re going to do, they understand our position, we’re not going to back off. We did the right thing, and there’s not a question of weakening or strengthening, it’s just the reality.’

Looking ahead, the US Dollar could see further movement when Federal Reserve Chair Jerome Powell is set to speak later on today. With rumours growing of a continued aggressive tightening cycle, the ‘Greenback’ could climb on increased rate hike bets. After Powell having already indicated that there was ‘more work to do’, and since the stronger-than-expected labour market data, investors will be keenly awaiting any comments.

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