Pound US Dollar (GBP/USD) Exchange Rate Drops amid Risk-off Trading
The Pound US Dollar (GBP/USD) exchange rate is steadily falling today. Widespread risk-off trading is causing investors to flock to the safe-haven ‘Greenback’. The Pound (GBP) meanwhile is struggling as investors pare back bets on a larger rate hike from the Bank of England (BoE).
At time of writing the GBP/USD exchange rate is at around $1.2696, down around -0.3% from this morning’s opening figures.
US Dollar (USD) Boosted by Hopes of Aggressive Fed Rate Hike
The US Dollar (USD) is climbing against many of its rivals today. USD is largely being pushed higher by a sharp retreat in global risk appetite this week.
The risk-off trading has been prompted by fears of further Covid-19 lockdowns in China that could harm the country’s economic output. Authorities in Beijing have recently ramped up testing efforts to cover the majority of the city’s 22M residents.
Signals that the Fed is set to move faster than anticipated on interest rates is also likely helping to bolster USD today.
The optimism follows comments from Fed Chair Jerome Powell last week. Powell stated that a 0.5% rate hike was ‘on the table’ and that he would be open to ‘front-end loading’ regarding monetary policy.
Pound (GBP) Dips as Investors Limit BoE Rate Hike Bets
The Pound (GBP) is losing ground today. The paring back of bets on an aggressive rate hike from the BoE may be weighing on Sterling today. Poor recent data releases for GBP may also be contributing to the currency’s fall today.
Whilst the BoE is largely expected hike rates at its May meeting, the course of its action seems less certain. Investors had previously been betting on a more aggressive hike after UK inflation hit a 30-year high this month.
A poll by Reuters this week found that 33 out of 44 economists surveyed agreed that the central bank would hike rates this month. Analysts feel however that a 0.5% rate hike now seems unlikely in the face of the country’s cost-of-living crisis.
Elizabeth Martins of HSBC said:
‘Given this is the first forecast round since the invasion of Ukraine, with commodity prices having risen sharply as a result, we can understand this view. On balance, we don’t think it will be quite as hawkish as the market expects.’