Pound US Dollar (GBP/USD) Exchange Rate Ticks Higher as Truss Appointed UK PM
The Pound US Dollar (GBP/USD) exchange rate is edging higher today. The currency pair is likely finding support from increased stability in the UK political sphere after the appointment of Liz Truss as Prime Minister.
On the other hand, gains for the pair may be capped by higher US Treasury bond yields and persistent Federal Reserve rate hike bets.
At time of writing the GBP/USD exchange rate is at around $1.1584, which is up around 0.2% from the morning’s opening figures.
Pound (GBP) Climbs amid Reports of Drastic Financial Support for Households and Businesses
The Pound is seeing gains against its rivals today. The confirmation of Liz Truss as the UK’s new Prime Minister has likely lent some support to Sterling.
Reports that Truss is set to announce a £40b aid package to combat soaring household and business energy costs may also be bolstering GBP.
Sterling may also be seeing support from increased bets on further interest rate hikes from the Bank of England (BoE). Hawkish comments from BoE policymaker Catherine Mann likely added fuel to market speculation.
Speaking on Monday, Mann said:
‘The gradual pace of increase in Bank Rate has not tempered expectations enough. A fast and forceful monetary tightening, potentially followed by a hold or reversal, is superior to the gradualist approach.’
Gains for the Pound could be capped by earlier signals from Truss that she may seek to undermine the central bank’s independence, however.
US Dollar (USD) Firms as Fed Rate Hike Bets Increase
The US Dollar (USD) is ticking higher today amid persistent bets on interest rate hikes from the Federal Reserve. The hawkish tact from the central bank is also helping to push US Treasury bond yields higher.
Markets are increasingly pricing in the prospect of a 0.75% rate hike from the Fed at their September meeting. Last week saw multiple policymakers reiterate their support for such a move.
Speaking last week, New York Fed chief John Williams said:
‘I see us needing to kind of hold a policy stance – pushing inflation down, bringing demand and supply into alignment – it’s going to take longer, will continue through next year.’
A risk-on impulse in the markets is likely limiting gains for the safe-haven ‘Greenback’ against some of its peers.