Pound US Dollar (GBP/USD) Exchange Rate Declines as Markets Reassess Fed Expectations
The Pound US Dollar (GBP/USD) exchange rate fell sharply this morning as expectations of another Federal Reserve interest rate rise boosted the ‘Greenback’.
Currently, GBP/USD is trading at $1.2432, down 0.4% on the day.
US Dollar (USD) Set for More Fed-Inspired Gains?
The US Dollar (USD) strengthened against the Pound (GBP) this morning, as the American currency was boosted by bets on more policy tightening from the Fed.
Recent economic data and comments from Fed officials have seen markets increase the odds of another interest rate hike from the US central bank at its next meeting. Markets had previously been pricing in a pause.
Today, US Treasury yields hit a 17-day high, having climbed sharply and steadily over the past week. Higher Treasury yields are often an indicator of Fed rate hike bets, and they also support the US Dollar.
Looking forward, Fed expectations could see the ‘Greenback’ gain more ground later in the session. Three Fed rate setters are due to deliver speeches through the afternoon, two of whom are on the more hawkish end of the spectrum. If any of the policymakers advocate the need for more rate rises, USD could climb higher.
The latest US jobless claims data could also impact USD. Economists expect a slight decline in unemployment benefits claims, which could indicate that the US labour market remains fairly tight, further boosting Fed bets.
Pound (GBP) Muted amid Lack of Data
Meanwhile, the Pound was subdued this morning, despite an upbeat market mood, amid a lack of UK economic data.
As the session progresses, comments from Bank of England (BoE) policymakers could impact the Pound. At the time of writing, BoE Governor Andrew Bailey and Deputy Governors Ben Broadbent and Dave Ramsden are being grilled by MPs on the Treasury Select Committee. Any dovish or hawkish hints could dent or support Sterling, respectively.
Later in the day, risk appetite could be the driving factor for the Pound. Will an increasingly upbeat market mood help the riskier Pound recoup losses against the safe-haven US Dollar?
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