The Pound-Dollar rate could come under pressure if the Federal Reserve strikes a hawkish tone, while the UK Budget may trigger fresh Sterling volatility.
The Pound US Dollar (GBP/USD) exchange rate faltered on Tuesday, as GBP investors erred on the side of caution ahead of the UK’s Autumn Budget.
At the time of writing, GBP/USD was trading at around $1.3331. A slight decline from Tuesday’s opening levels.
Pound to Dollar (GBP/USD): 1.33058 (-0.30%)
Dollar to Yen (USD/JPY): 157.97389 (+0.27%)
DAILY RECAP:
The Pound (GBP) traded on the back foot on Tuesday, amid uncertainty ahead of Chancellor John Healey’s inaugural Autumn Budget.
Healey has offered few concrete hints regarding specific tax and spending plans, indicating only that his policy choices will align with Prime Minister Andy Burnham’s commitment to give squeezed households and businesses much-needed breathing space.
However, the Chancellor faces significant challenges in addressing the deterioration in the government’s fiscal headroom, with higher borrowing costs and weaker-than-expected tax receipts complicating efforts to meet his fiscal rules.
This has left GBP investors to err on the side of caution as they wait for Healey to unveil his budget following PMQs on Wednesday.
The US Dollar (USD) treaded water on Tuesday as the currency stabilised following a rebound in technology stocks sparked by AI developer Anthropic’s IPO filing.
The announcement helped restore some confidence in AI-related investments after a recent sell-off, improving market sentiment and lifting US equities at the start of the week.
US macroeconomic data also proved supportive of USD after reporting that durable goods orders outpaced expectations to rise to a five-month high in September.
Near-Term GBP/USD Forecast: Hawkish Fed to Turbocharge the ‘Greenback’?
Turning to Wednesday’s session, the Pound to US Dollar (GBP/USD) exchange rate could face pressure as the Federal Reserve delivers its latest interest rate decision.
While the Fed is widely expected to leave interest rates on hold following its October policy meeting, a hawkish tilt from the bank could cement bets for a December hike and trigger fresh gains for the ‘Greenback’.
In the meantime, relatively optimistic expectations surrounding Healey’s budget could leave Sterling vulnerable to losses if the Chancellor fails to convince bond markets regarding the merits of his fiscal policies.
Our currency coverage draws on live market data, official economic releases and published bank research.
