US Inflation Makes Little Impact on Pound to US Dollar Exchange Rates
Updated 16:41 GMT 14/02/2018:
Wednesday’s US Consumer Price Index (CPI) report beat expectations in all major prints and briefly boosted demand for the US Dollar (USD).
US inflation was forecast to come in at 0.3% month-on-month and 1.9% year-on-year, but came in at 0.5% and 2.1% respectively.
The Pound to US Dollar (GBP/USD) exchange rate briefly dropped to a low of 1.3807 following the news, but the pair then quickly recovered and even reached a new weekly high of 1.3970.
Some analysts noted that the stronger inflation report may be a blip and may not signify stronger inflation trends. Other expressed concern over the latest US retail sales results.
As a result, the US Dollar failed to capitalise on the inflation data and the Pound (GBP) ended up comparatively more appealing.
[Published 11:39 GMT 14/02/2018]
As investors cool from last week’s equity market selloff and Brexit uncertainties persist, the Pound to US Dollar (GBP/USD) exchange rate has advanced this week – but not much.
After a major drop from 1.4121 to 1.3827 last week, GBP/USD movement has been narrower. The pair has only climbed about half a cent this week so far and has slipped from Wednesday morning’s high of 1.3919.
For now, investors are anticipating key US data due on Wednesday afternoon before making any major moves on the Pound to US Dollar (GBP/USD) exchange rate.
Wednesday’s American session will see the publication of US Consumer Price Index (CPI) data from January, which is forecast to have slipped slightly year-on-year.
If they impress and boost Federal Reserve interest rate hike bets, the GBP/USD outlook would likely decline and the US Dollar may even resume last week’s bullish run.
Pound (GBP) Exchange Rates See Limited Boost from UK Inflation Results
Despite Britain’s January Consumer Price Index (CPI) results beating expectations, the Pound (GBP) failed to notably benefit from the data and only edged narrowly higher against the US Dollar (USD) on Tuesday.
Britain’s January inflation rate was forecast to contract at -0.6% month-on-month but instead only fell from 0.4% to -0.5%. The yearly inflation rate was forecast to slip to 2.9% but remained at a high 3%.
Notably, Britain’s yearly core inflation rate rose from 2.5% to a stronger than expected 2.7%.
The data indicated that UK inflation was becoming more domestic, rather than being caused by the weak Pound’s impact on import prices.
However, as Brexit concerns have persisted, with analysts and businesses still in the dark on what kind of Brexit the UK government will aim to negotiate with the EU, Sterling’s gains were limited.
Pound to US Dollar (GBP/USD) Outlook Forecast to be influenced by US Ecostats
The Pound to US Dollar (GBP/USD) exchange rate could see a shift in direction on Wednesday, depending on the results of upcoming major US ecostats.
Wednesday’s American session will see the publication of US Consumer Price Index (CPI) and retail sales stats from January.
US inflation is forecast to have slowed year-on-year, but if it beats expectations it could boost market hopes that the Federal Reserve will quicken the pace of its monetary policy tightening plans this year.
US retail sales are also forecast to have slowed. If retail activity was more resilient than expected in January it could further boost US Dollar sentiment.
But could the US Dollar really resume last week’s bullish run, or could GBP/USD continue to climb regardless of US data?
Sterling has been weighed by uncertainties revolving around Brexit negotiations and is investors are likely to react to any developments from UK or EU negotiators, particularly any signs that indicate a ‘soft Brexit’ is more likely.
Friday’s UK retail sales results from January could also inspire some Pound movement. Overall though, the Pound to US Dollar (GBP/USD) exchange rate outlook will be uncertain and its gains limited until more Brexit details become clearer.
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