GBP/USD Exchange Rate Wavers as UK Avoids Winter Recession
The Pound US Dollar (GBP/USD) exchange rate is fluctuating as UK records modest quarterly growth amidst economic turmoil, avoiding a winter recession.
At time of writing the GBP/USD exchange rate is around $1.2384, almost a half percent fall from this morning’s opening levels.
Pound (GBP) Supported by Modest Economic Growth
The Pound (GBP) is enjoying some modest strength this morning after the Office for National Statistics (ONS) confirmed that the UK economy expanded 0.1% QoQ in the first quarter of this year.
The news that the UK avoided a winter recession cheered GBP investors as the economy saw growth across all major sectors. The ONS added:
‘In output terms, the services sector grew by 0.1% on the quarter driven by increases in information and communication, and administrative and support service activities; elsewhere, the construction sector grew by a revised 0.4% (previously 0.7%), while the production sector grew by 0.1%, with a revised 0.6% growth in manufacturing (previously 0.5%).’
Looking ahead to next week, the UK manufacturing PMI is due to print on Monday. The final reading is expected to confirm that factory activity slipped another month. Marking the 11th straight month of the sector remaining in contraction territory, a downbeat sector won’t buoy GBP investors. The concerning outlook for the UK economy could see Sterling slip once again.
US Dollar (USD) Quiet ahead of Inflation Reading
Meanwhile, the US Dollar (USD) is fairly subdued this morning as investors await the Federal Reserve’s preferred gauge of inflation. The Core PCE Price Index is expected to print and show a slight slowdown.
USD investors appear to be shifting to the sidelines in anticipation of the latest reading. Being the preferred measure of consumer inflation in the US, the figure could well dictate the next monetary policy decision from the Fed. Markets predict the monthly reading will slow to 0.3%, as the yearly figure is due to remain at 4.7%. If the predictions prove accurate, the ‘Greenback’ could climb further on elevated rate hike bets.
With yesterday’s tumbling jobless claims, and a much better-than-expected rise in GDP growth, the US Dollar could climb significantly on further interest rate hike bets. Chris Turner, Global Head of Markets and Regional Head of Research for UK & CEE at ING, said of the situation:
‘May’s core PCE deflator is expected at a firm 0.3-0.4% MoM, consistent with the Fed’s view that core inflation is not falling quickly enough. That should keep US rates and the dollar firm.’
Comments are closed.