Pound-Dollar could remain under pressure if Jackson Hole reinforces Fed tightening expectations, while Sterling lacks fresh domestic support.
The Pound US Dollar (GBP/USD) exchange rate fell back on Wednesday as markets digested the latest US economic data.
At the time of writing, GBP/USD was trading at around $1.3609. Down around 0.3% from Wednesday’s opening levels.
DAILY RECAP:
The US Dollar (USD) appreciated against the majority of its peers on Wednesday, following the publication of the latest US core PCE price index.
The Federal Reserve’s preferred indicator for inflation revealed price hold held steady at 3.3% in July, just shy of the two-year high of 3.4% struck in May.
Signs of persistent inflationary pressures in the US were welcomed by USD investors as it increases the odds of the Fed tightening monetary policy later in the year.
Reinforcing the upside in the US Dollar was the accompanying publication of the latest US durable goods orders, which reported a much stronger rise in order growth than markets had expected last month.
The Pound (GBP) came under broad selling pressure on Wednesday as news of a 4% hike to the UK energy price cap brought household finances back into sharp focus.
While the increase was largely anticipated following prolonged supply disruptions in the Gulf, currency traders worry the additional financial strain on consumers could derail the UK’s nascent economic recovery.
At the same time, higher utility bills threaten to fuel another bout of inflation, complicating matters for the Bank of England (BoE) and potentially forcing policymakers to weigh further monetary tightening before the end of the year.
Near-Term GBP/USD Forecast: Jackson Hole in the Spotlight
As we enter the second half of the week, the focus will undoubtedly switch to the Fed’s annual Jackson Hole symposium and what policy signals we may get from the US central bank.
New Fed Chair Kevin Warsh has sought to limit the guidance provided by the bank. But given recent inflation and bond jitters he may feel compelled to offer some insight into the Fed’s policy outlook.
This may see a sense of caution limit movement in the Pound to US Dollar (GBP/USD) exchange rate in advance of Warsh’s speech on Friday.
Meanwhile, in the absence of any notable UK economic indicators, Sterling sentiment is likely to be influenced by wider currency trends on Thursday.
Our currency coverage draws on live market data, official economic releases and published bank research.
