GBP/USD exchange rate muted amid absence of data
The pound US dollar (GBP/USD) exchange rate is trading in a narrow range this morning amid a scarcity of both UK and US economic data.
At the time of writing the GBP/USD exchange rate is trading at around $1.2928, virtually unchanged from this morning’s opening rate.
Domestic GDP to drive US dollar (USD) movement?
The US dollar (USD) could experience volatility this week following the publication of the latest preliminary US GDP data.
Scheduled for release on Thursday, 2024’s second quarter estimate is expected to rise from a previous reading of 1.4% up to 2%, and could see USD exchange rates surge should the data confirm the forecasted growth levels.
A September interest rate cut from the Federal Reserve is almost fully priced in, with the CME’s FedWatch Tool showing a 98% consensus.
However, if the latest index reveals that the US economy grew faster than anticipated, this could see the Fed keep interest rates higher for longer, and therefore underpin USD.
In the meantime, will an expected uptick in the latest domestic PMIs on Wednesday bolster the ‘Greenback’?
Pound (GBP) to firm following UK PMIs?
The pound (GBP) could firm against the majority of its peers on Wednesday following the publication of the UK’s preliminary PMIs for July.
The UK’s all-important services sector is expected to report that growth in the sector began to accelerate again, forecast to rise from 52.1 to 53, and could support GBP in mid-week trade.
Furthermore, the manufacturing index is forecast to report a slight uptick in July’s figures, forecast to rise from 50.9 to 51.1, and could further bolster Sterling should the data match expectations.
In the meantime, GBP exchange rates are likely to remain muted, amid a lack of UK data releases.
Sterling sentiment is further subdued this morning following hints from the new UK Chancellor Rachel Reeves on an above-inflation pay rise for public sector workers.
While the Chancellor said that there is ‘a cost to not settling’ pay negotiations, independent analysis from the Institute for Fiscal Studies (IFS) estimates a potential 5.5% pay rise across the public sector would cost the government £10bn, leaving GBP investors worried this will place significant pressure on government finances.
Comments are closed.