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Pound US Dollar (GBP/USD) Exchange Rate Slips as Sunak Announces Windfall Tax

Pound US Dollar

Pound US Dollar (GBP/USD) Exchange Rate Dips as Sunak Announces Household Support

The Pound US Dollar (GBP/USD) exchange rate is slipping lower today. Despite UK Chancellor Rishi Sunak’s promise of financial support for UK households, the country’s cost-of-living crisis is likely to continuing to weigh on the pair.

An above-forecast fall to US GDP growth may have helped GBP/USD to regain some of its earlier losses, however. Better than expected US jobless figures may curtailed any of the pairs’ gains however.

At time of writing the GBP/USD exchange rate is at around $1.2563, which is down roughly -0.2% from this morning’s opening figures.

Pound (GBP) Drops as NI Protocol Tensions Increase

The Pound (GBP) is edging lower today as the country’s cost-of-living crisis continues to suppress gains for Sterling. The currency saw a boost after Chancellor Rishi Sunak announced a package of measures targeted to help those on low-income.

Gains for Sterling were short lived however, with the support from Sunak coming under widespread criticism from business leaders.

A paring back of Bank of England (BoE) rate hike expectations may also be pulling GBP lower today. Amid warnings that UK inflation could hit 14% later in 2022, traders have reduced their bets on a BoE rate hike.

Ongoing tensions over the Northern Ireland Protocol could also be limiting any gains for the Pound today. EU diplomats have grown increasingly concerned that the UK could scrap elements of the Northern Ireland Protocol through legislative efforts.

US Dollar (USD) Sees Mixed Fortunes after FOMC Minutes

The US Dollar (USD) is trending higher against its riskier rivals today, whilst struggling against its risk-averse competitors.

The release of the FOMC minutes yesterday, rather than providing any hawkish surprises, saw investors pare back bets on sustained rate hikes from the Federal Reserve. The minutes indicated that multiple Fed policymakers were in favour of a slowdown once rates hit neutral levels. This in turn may be keeping pressure on USD today.

Baird analyst Ross Mayfield said:

‘By the time the Fed  gets to September, they will have plenty of economic data to make their move from there, so they continue to maintain optionality.’

An above-forecast fall to US GDP growth may have also be causing the currency to edge lower. The fall was attributed to a larger trade gap rather than a drop in spending.

A surprise fall to US initial jobless claims may have helped to underpin USD, however.

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