Pound US Dollar (GBP/USD) Exchange Rate Edges Lower as US Treasury Bond Yields Climb
The Pound US Dollar (GBP/USD) exchange rate is drifting lower today. A mixed market mood may be weighed on the pairing.
An uptick in US Treasury bond yields may also be pulling the exchange rate lower today, as well as a generally cautious mood in the markets.
However, expectations of a rate hike pause from the Federal Reserve next week could be cushioning the currency pairing’s losses.
At time of writing the GBP/USD exchange rate is at around $1.2539, which is down roughly 0.2% from this morning’s opening figures.
Will US Dollar (USD) Tank if Fed Skips June Rate Hike?
Ahead of the Fed’s interest rate decision next week, the latest inflation figures could add to bets on a pause in policy tightening from the central bank. May’s inflation and core inflation are both set to edge lower when the figures print on Tuesday. This could pull the US Dollar (USD) lower.
On Wednesday ahead of the Fed’s meeting, May’s reading of the producer price index (PPI) is set to remain at 0.2%. The stagnation in the index could add to the cautious rate hike bets.
Investors will be most keenly awaiting the Fed’s interest rate decision on Wednesday afternoon, however. The US Dollar could tumble if the central bank keeps interest rates on hold.
On the other hand, if the Fed leaves the door open for further rate hikes it could limit USD’s downside.
Could Softer Labour Data Push Pound (GBP) Lower?
The Pound (GBP) could come under pressure on Tuesday if employment data print as forecast. April’s unemployment rate is expected to increase to 4%. Additionally, the UK economy is set to have shed 20,000 jobs in March.
The signs of a cooling labour market could also ease pressure on the Bank of England (BoE) to continue with its pace of policy tightening.
On the other hand, if wage growth data trends higher it could underpin Sterling and limit any pullback in BoE bets.
April’s GDP data will be the other significant data release for the Pound next week. The data is expected to confirm a 0.3% expansion in the UK’s economy following 0.3% contraction in March. The strong performance in the country’s economy could bolster GBP.