GBP/USD Exchange Rate Set to Slump Further amid UK’s Cost-of-Living Crisis
The Pound US Dollar (GBP/USD) exchange rate is weakening today as UK social unrest compounds recession fears ahead of expected downbeat retail sales.
At time of writing the GBP/USD exchange rate is around $1.2001, a 0.30% plunge from this morning’s opening levels.
Pound (GBP) Undermined by Mounting Domestic Troubles
The Pound (GBP) is under increased pressure today as a lack of data has left Sterling exposed to the worsening cost-of-living crisis.
Several headwinds are weighing heavily on Sterling today as social unrest and the cost-of-living crisis offsets any optimism surrounding future rate hikes. As UK inflation soared to 10.1% annually for the month of July, the cost-of-living crisis is set to worsen, leaving the economy on the brink of a recession.
A study conducted by the University of York have shown that two-thirds of UK households will be plunged into fuel poverty. With expectations of energy bills to soar by 80% in the winter, over 45 million people are expected to be left struggling to make ends meet unless the government can provide fiscal support.
Meanwhile, the ‘summer of discontent’ shows no signs of slowing, with the discontent set to continue into autumn. Mick Lynch, RMT General Secretary, has warned that unions could synchronise general strikes, potentially bringing the UK to a standstill.
Looking ahead and the Pound could be set to slide further if retail sales print as forecasted. A second consecutive month of declining retail sales further compounds growing recession fears.
US Dollar (USD) Strengthens amid Risk-Off Market Sentiment
The US Dollar (USD) is enjoying moderate strength today against its peers as concerns of a global economic slowdown resurface.
After the latest Federal Open Market Committee (FOMC) minutes revealed on Wednesday that despite softening inflation, the Federal Reserve is committed to continuing its path of raising interest rates until inflation is below their 2% target. However, dovish tones were struck as fears of a more ‘restrictive policy’ could be undertaken if the US economy was to slow further.
Looking ahead and several speeches from Fed policymakers could further influence the ‘Greenback’ as investors will be waiting with bated breath on any further policy tightening clues. However, if the speeches were to continue the dovish undertones, then the US Dollar could come under renewed pressure.