Pound US Dollar (GBP/USD) Exchange Rate Wavers amid Mixed Risk Appetite
The Pound US Dollar (GBP/USD) exchange rate is trading narrowly this afternoon, as a souring market mood reverses GBP’s earlier gains.
At the time of writing, GBP/USD is trading at around US$1.2745, showing little movement from the morning’s opening rates.
Will Private Sector Slowdown Dent GBP?
For the remainder of today’s session, the Pound (GBP) could continue to endure choppy trade. Owing to a lack of data releases, the increasingly risk-sensitive Sterling may be left to trade on market dynamics.
With the mood currently leaning towards tepid, GBP has lost its earlier gains brought about by risk-on trade.
Looking ahead to tomorrow, the Pound may struggle to attract support following the release of the latest private sector indexes.
Both manufacturing and service sectors are forecast to have slowed further in August, which could spark further recession anxieties. The UK economy remains in a very precarious place, amid high interest rates and even-higher inflation.
However, with the Bank of England (BoE) still likely to hike interest rates by at least 25bps in September, the Pound could remain afloat.
Elsewhere, risk appetite is likely to play a role in shaping sentiment towards Sterling. If a bullish market mood surfaces, GBP could strengthen against safer assets such as the US Dollar (USD).
Will Mixed PMIs Cap USD?
The US Dollar has seesawed through today’s session so far, as a lack of impactful data releases brings risk appetite to the forefront.
As a safe-haven currency, the gradual shift to bearish trade over the course of the session has allowed USD to recover against some of its peers.
Further strength could come later in the session, as Federal Reserve Governor Michelle Bowman is scheduled to speak. If she strikes a hawkish note, Fed hike bets could increase and propel USD rates higher.
Looking further ahead, tomorrow brings the release of the latest US private sector indexes. While the S&P releases are less impactful than the ISM data, the mixed picture could weigh on USD investors.
The service sector is forecast by economists to have decreased modestly in August, which could dent USD by pointing to economic slowdown. However, this could be nullified by an increase in the manufacturing index, if that prints in line with expectations.
Beyond this, investor attention may begin to turn to the upcoming Jackson Hole symposium, which begins on Thursday. With a suite of central bank members in attendance, any further clues on monetary policy could strengthen USD.