GBP/USD Exchange Rate to Rebound if UK Government Confirms Budget U-Turn
The Pound US Dollar (GBP/USD) exchange rate is currently on the defensive this morning but could surge if the UK government confirms plans to scrap more parts of its mini-budget.
At the time of writing the GBP/USD exchange rate is trading around $1.1267, which is roughly down 0.3% from this morning’s opening rate.
Pound (GBP) Poised to Rally if Government Confirms Budget U-Turn
The Pound (GBP) is down against the majority of its peers this morning as amid ongoing speculation regarding the future of Chancellor Kwasi Kwarteng’s mini budget.
Sterling stormed higher yesterday, following rumours that the government were in active discussions about thinning down the mini budget. These rumours cheered investors, who have had doubts on the government’s ability to deliver the fiscal plan for weeks.
Chancellor Kwasi Kwarteng has returned from his talks with the International Monetary Fund (IMF) early, which is underpinning hopes we could see an announcement today. It is widely believed that this U-turn will centre around scrapping the rise in corporation tax.
If the rise in corporation tax is cut from the budget, then the Pound will likely get a boost. However, if no announcement is forthcoming the prolonged uncertainty could erase more of Thursday’s gains.
US Dollar (USD) to Fall Further amid Upbeat Market Mood?
The US Dollar (USD) is also down against many of its peers this morning amid a prevailing risk-off mood.
This comes after the ‘Greenback’ spiked on Thursday after the latest US inflation printed hotter than expected.
Data released yesterday afternoon revealed that headline inflation in September printed at 8.2%, passing the expectation of 8.1%. Core inflation hit a 40-year high, rising more than expected to 6.6%.
Steve Rick, chief economist at CUNA Mutual Group has said:
‘We are starting to see persistent inflation creeping into the economy. We are really concerned about this turning into a wage price spiral, with wages rising and making it hard to get inflation down anytime soon.’
Looking ahead the US Dollar could stumble throughout the afternoon if retail figures for September print as forecast and drop from 0.3% to 0.2%. However, the University of Michigan is set to unveil the consumer confidence figures for October, and if it prints as expected, this could limit USD’s losses.
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