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Pound US Dollar Exchange Rate to Slip further amid Prevailing Risk-Off Sentiment?

Pound US Dollar Currency Forecast

GBP/USD Exchange Rate Set to Extend Slide amid Bearish Mood

The Pound US Dollar (GBP/USD) exchange rate is on the defensive this morning as growing recession fears weigh on the global economy and safe-haven flows support the ‘Greenback’.

At time of writing the GBP/USD exchange rate is around $1.2109, down roughly 0.4% from this morning’s opening rate.

US Dollar (USD) Set to Extend Upside with Safe-Haven Flows

The US Dollar (USD) is poised to extend it recent rally amid considerable risk-off flows.

Softer-than-expected inflation data weighed on the US Dollar yesterday, but growing fears of a global recession is causing investors to flock towards safe-haven currencies, providing a boost to the ‘Greenback’ this morning.

The US Dollar also looks to remain well supported by the Federal Reserve’s continued policy divergence against the major central banks, including the European Central Bank (ECB). As fragmentation and inflationary fears worry both investors and ECB policymakers, The US Dollar could see further upside.

This is particularly true after in the wake of a hawkish speech from Fed Chair Jerome Powell earlier this week. Fed raise hike bets were bolstered as Powell said he confident that the US economy is well-positioned to handle further tightening.

However, the US Dollar’s upside potential could be capped by an expected slowdown in the latest ISM manufacturing PMI due out later today. With an expected drop to 55 in June from 56.1, signs point to a slowdown in the US economy.

Pound (GBP) Poised to Soften amid Lack of Data and Domestic Headwinds

The Pound (GBP) has failed to build on its modest gains yesterday as it looks to weaken amid a gloomy economic outlook.

June’s finalised manufacturing PMI printed earlier today revealing activity in the UK’s factory sector plummeted to a two-year low and missing market expectations of 53.4. A third consecutive month of shrinking growth further points to the slowdown in the UK economy.

Data remains thin on the ground for the remainder of the week, but lending data could inspire movement with the Pound as it hints at how households are coping with the ongoing cost-of-living crisis. Elsewhere, further downward pressure to the Pound could be seen with the ongoing political and social issues gripping the UK. With another Conservative MP resigning in disgrace, Boris Johnson will be under further pressure as he seeks to regain control in a fractured party.

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