Pound US Dollar Exchange Rate Edges Down as UK Cost-of-Living Crisis Continues
The Pound US Dollar (GBP/USD) exchange rate slipped this morning as investors worry about the UK cost-of-living crisis.
At the time of writing, the GBP/USD exchange rate is trading at approximately $1.2185, having fallen from the start of today’s European session.
Pound (GBP) Stumbles amid UK Cost-of-Living Crisis
The Pound (GBP) is slipping against the US Dollar (USD) this morning, losing the gains made during overnight trade, as the UK’s cost-of-living crisis intensifies.
As household incomes struggle to keep up with surging inflation and rising energy bills, the UK government is looking to free up £3.75bn to support UK economy.
Government is seeking to reduce the number of civil servant jobs by 91,000, returning to 2016 levels of staffing.
Boris Johnson believes the £3.75bn savings are ‘realistic’ and will support the UK economic recovery as the UK cost-of-living crisis starts to bite.
However, the government has been accused of ‘pointless rhetoric and lack of action’ by the opposition party.
Moreover, the union for managers and professionals in public service (FDA) general secretary, Dave Penman, stated:
‘Without an accompanying strategy, these cuts appear more like a continuation of the government’s civil service culture wars – or even worse, ill-thought out, rushed job slashes that won’t lead to a more cost-effective government.’
Fears that these measures will do little to alleviate the UK’s income crunch are putting pressure on Sterling.
In addition, Brexit woes have returned this week, further weighing on GBP exchange rates.
Following Sinn Fein’s victory in the Northern Ireland elections, the UK is looking to amend, and possibly scrap, the Northern Ireland protocol.
Yesterday, the UK and the EU failed to reach a diplomatic solution to the issues regarding the protocol.
This is likely to cause friction between the UK and the EU, and could potentially trigger a trade war. As a result, it is spooking GBP investors.
US Dollar (USD) Gains Despite Risk-On Mood
The US Dollar is rising against a weakening Pound this morning in spite of a risk-on sentiment.
The upside comes as Federal Reserve interest rate hikes bets continue to underpin demand for the US Dollar.
Markets anticipate the Fed will continue to raise interest rates aggressively throughout the year, implementing far more muscular action than the Bank of England (BoE). This comes in spite of Fed Chair Jerome Powell dampening hopes of a 75-basis point at the last meeting.
Later this afternoon, the US Dollar may be pressured by the upcoming US Michigan Consumer Sentiment report.
The preliminary figures for March are predicted to slip from 65.2 to 64. If this prints true, it may weigh on USD exchange rates.