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Pound US Dollar (GBP/USD) exchange rate forecast: US inflation in focus

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GBP/USD exchange rate fluctuates amid

The Pound US Dollar (GBP/USD) exchange rate wavered today amid a lack of notable data releases.

At the time of writing the GBP/USD exchange rate is trading at around $1.2722, virtually unchanged from this morning’s opening rate.

US Dollar (USD) wobbles amid shifting market mood

The US Dollar (USD) wavered today as a spell of cautiously upbeat trade stifled the safe-haven currency.

Looking ahead, the ‘Greenback’ may see a volatile few days of trade, with the release of impactful US data.

The latest inflation data is due for release on Thursday, with economists expecting to see headline inflation warming to 3.2% in December. Should the data print in line with expectations, US inflation will have risen for the first time in four months, which may serve to quell surmounting expectations of forthcoming Federal Reserve interest rate cuts.

Also due out on Thursday is the latest US employment data. A forecast increase in initial jobless claims for the week ending January 6 may dent the US Dollar, serving to reinforce concerns of a loosening labour market.

A speech by Federal Reserve policymaker Tom Barkin could drive USD movement. Should Barkin strike a hawkish tone, USD may edge higher as investors resize rate cut expectations.  

A forecast increase of 0.1% in US PPI throughout December may offer the ‘Greenback’ some support. Investors may view the marginal uptick in factory inflation as a precursor to future CPI readings, thereby offering USD some modest support amid suggestion of slightly warming inflation.

Pound (GBP) zig-zags amid data lull

The Pound (GBP) is moving without a clear trajectory today ahead of Bank of England (BoE) Governor Andrew Bailey’s speech this afternoon.

While investors are currently betting that interest rate cuts may occur in the first quarter, Bailey is expected to push back against these speculations.

Should the BoE policymaker successfully convince investors and economists alike that rate cuts remain a distant possibility, GBP may strengthen amid suggestion of hawkish monetary policy.

UK data then remains in short supply until the release of vital GDP reports on Friday. Economists expect to see 0.2% growth in November, which could offer a healthier outlook for the UK’s economy, in comparison to the previous month’s 0.3% contraction.

In the meantime, the Pound US Dollar exchange rate may remain vulnerable to shifts in risk appetite. Movement towards upbeat trade may see the increasingly risk sensitive Pound take precedent.

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