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Pound US Dollar (GBP/USD) Exchange Rate to Firm on BoE Consumer Credit, Gov Bailey Speech?

Pound US Dollar

GBP/USD Exchange Rate to Edge up on Positive Lending Data?

The Pound US Dollar (GBP/USD) exchange rate has plummeted through today’s session as the UK fuel crisis suppresses Pound (GBP) sentiment and the US Dollar (USD) attracts support on the basis of its safe-haven status.

At the time of writing, GBP/USD is trading at $1.3534, down 1.2% from today’s opening levels.

Pound (GBP) to Overcome Fuel-Based Headwinds?

The Pound has struggled against its peers this past week as rocketing UK gas prices were followed by EU visa criticism and more recently, fuel shortages as a lack of HGV drivers has disrupted the transportation of petrol and diesel to forecourts.

GBP sentiment remains subdued today as a risk-off market mood weighs upon Sterling in the wake of energy concerns in China. A shortage of coal and other fuels used to create electricity has limited energy supply, threatening China’s economy and global trade.

Looking ahead, the UK’s Transport Secretary Grant Shapps has told reporters that there are ‘very tentative signs’ of the fuel crisis coming to an end, which is likely to buoy spirits if proven correct.

Shapps remarked:

‘[This is] the first time that we have seen more petrol in the petrol stations… As the industry said yesterday, the sooner we can all return to our normal buying habits, the sooner the situation will return to normal.’

Tomorrow’s Bank of England (BoE) consumer credit release may provide further tailwinds, if August’s borrowing reveals a £0.3bn increase as expected. A hawkish speech from the BoE’s Governor Andrew Bailey could also help GBP to recoup some of its losses.

US Dollar (USD) to Retain Gains on Fed Optimism?

The US Dollar found support today on a risk-averse trading climate – the ‘Greenback’ generally attracts support in times of uncertainty. USD also gained off the back of hawkish comments various Federal Reserve speakers.

New York’s John Williams and Chicago Fed’s Charles Evans concurred yesterday that the US economy is close to exhibiting ‘substantial further progress’, indicating that a moderation in the pace of asset purchases may soon be warranted.

In today’s speech, Fed Chairman Jerome Powell struck a slightly more dovish tone. Both Powell and Treasury Secretary Janet Yellen warned that the Covid Delta variant had slowed economic recovery, while acknowledging that the economy was continuing to strengthen.

Looking forwards, further speeches from Federal Reserve officials are likely to drive USD movement. Governor Michelle Bowman will speak this evening, followed by Raphael Bostic, Atlanta’s Fed President.