GBP/USD Exchange Rate Looking to Soften ahead of Weak UK Data
The Pound US Dollar (GBP/USD) exchange rate is set to fluctuate as UK CPI prints at a fresh 40-year high ahead of a flurry of potentially poor UK data.
At time of writing the GBP/USD exchange rate is around $1.225, relatively unchanged from this morning’s opening rate.
Pound (GBP) Poised to Slump amid Bleak Economic Landscape
The Pound (GBP) could be set to plummet as several pieces of key UK data is set to print poorly this week. With both the manufacturing and services PMI set to print tomorrow, the Pound could come under increased pressure as both reports are expected to show a slowdown in economic growth from last month.
The UK’s latest retail sales figures are also expected to report slump in sales growth when they print on Friday.
As May’s CPI hit fresh highs of 9.1% today, all eyes will be on how the Bank of England (BoE) will react in their efforts to combat soaring inflation. UK Chancellor Rishi Sunak said:
‘Firstly, the Bank of England will act forcefully to combat inflation. Secondly, the government will be responsible with borrowing and debt so we don’t make the situation worse and drive up people’s mortgage rates any more than they’re going to go up.
‘And lastly, we’re improving the productivity of our economy, improving the supplies of energy we have and moving people off welfare into work.’
If the BoE emulate Sunak’s hawkish stance, investors could be inspired and in turn, Sterling could see a much-needed boost.
US Dollar (USD) Set to Climb amid Hawkish Fed
The US Dollar (USD) could see further gains as prevailing risk-off sentiment boosts demand for the ‘Greenback’. With global recession fears mounting amid aggressive interest hikes from central banks, demand grows for safe-haven currencies.
With the Federal Reserve expected to hike rates by another 75bps in July, all eyes will be on Fed Chair Jerome Powell as he is set to testify before the US Senate Banking Committee later today and tomorrow. Investors will be keen for any further clues about the Fed’s policy tightening going forward.
Potentially capping any further gains could be the printing of mixed data. With initial jobless claims expecting to fall by 2000 from last month, a continued tight labour market could provide a boost for the US Dollar. However, a forecasted drop in manufacturing PMI could hinder the ‘Greenback’.