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Will GBP/USD Waver on US Economic Slowdown?

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Pound US Dollar (GBP/USD) Exchange Rate Rangebound amid Bleak UK Headlines

The Pound US Dollar (GBP/USD) exchange rate is trending lower this morning, as thin trade turns the focus on bleak UK headlines.

At the time of writing, GBP/USD is trading at around US$1.2391, showing little movement but trending downward from the morning’s opening rates.

US Dollar (USD) to Waver on GDP Data?

The US Dollar (USD) could see volatility later today, following the release of this afternoon’s GDP growth rate for Q4. Analysts are predicting a slowdown in growth, from 3.2% to 2.6%.

If this prints as forecast, it may bring cheer to wider markets by showing the Federal Reserve could be about to deliver a soft landing for the US Economy. As such, it could alleviate fears of a global recession by showing resilience in the world’s largest economy. This may weaken the ‘Greenback’ by sparking an upbeat market mood.

On the other hand, this could also leave room for further interest rate hikes from the Fed. Thus far, the central bank has indicated that they are ready to slow the pace of tightening. However, if inflation remains high and the economy remains in growth, it offers more room for the Fed to continue tightening.

On Friday, the core PCE price index YoY is due to print for December. As the Fed’s preferred gauge of inflation, the forecast of a fall from 4.7% to 4.4% could harm USD by giving further evidence for slower tightening.

Pound (GBP) to Struggle amid Thin Liquidity?

Once again, the Pound (GBP) may struggle through the end of the week, due to a lack of macroeconomic data releases.

As such, the spotlight could shift to domestic issues. Currently, industrial action is continuing across the UK with fresh walkouts announced on a regular basis. Any further news of strikes could weigh on Sterling, as the UK economy already begins to feel the strain of the action.

Furthermore, later this morning brings the Confederation of British Industry’s (CBI) distributive trades survey for January. The survey, which monitors retail sales, is currently forecast to show a sharp decline from 11 to -5, and is expected to be indicative of how UK consumers are cutting back on spending.

If this prints as forecast, the UK economy may find an extra notch in its bleakness, and may contribute fresh headwinds to GBP.

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