Home » GBP » Pound US Dollar (GBP/USD) Exchange Rate Forecast: Slowing US Inflation to Weaken Fed Rate Hike Bets?

Pound US Dollar (GBP/USD) Exchange Rate Forecast: Slowing US Inflation to Weaken Fed Rate Hike Bets?

Stack of US Dollar banknotes

GBP/USD Exchange Rate Fluctuates as US Inflation Slows

The Pound US Dollar (GBP/USD) exchange rate is mixed today as a cooling of US inflation pressures USD.

At the time of writing the GBP/USD exchange rate is trading at around $1.2256, rising 0.2% from this morning’s opening rate.

US Dollar (USD) Dips as US Inflation Cools

The US Dollar (USD) looks as though it will continue to stumble following today’s release of the US core PCE price index.

The Federal Reserve’s preferred measure of inflation came in as expected at 3.9% in August, having cooled from 4.3% in July. This is applying pressure to USD this afternoon as it undermines Fed rate hike bets.

With the upcoming US manufacturing ISM surveys due on Monday, the US Dollar could continue to face headwinds at the start of next week. With ISM readings expected to remain bleak, indications of a prolonged contraction in the US manufacturing industry may stifle the ‘Greenback’.

On the other hand, the bleak data readings could unnerve investors, and in turn bolster the appeal of safe-haven assets like the US Dollar.

Pound (GBP) Muted Following GDP Data Release

While today’s UK GDP data at first glance look positive for the Pound (GBP), the upside in the currency remains limited as the overall economic outlook remains bleak.

Ruth Gregory, deputy chief UK economist at Capital Economics comments:

‘The final Q2 2023 GDP data release shows that the economy was a bit more resilient in the first half of this year than we previously thought. But other indicators suggest this is now fading. We still think that higher interest rates will trigger a mild recession involving a 0.5% fall in GDP in the coming quarters.’

A lack of notable UK data in the coming days could result in GBP being driven by the finalised PMIs released next week. PMI figures are expected to confirm a significant dip within the vital services sector, indicating a slowdown in UK economic productivity. Similarly, a disappointing manufacturing PMI could see the Pound slip further.

General economic gloom may continue to drive GBP in the coming days, particularly amid a lack of promising data.

Comments are closed.