The Pound-Dollar rate could come under pressure if Fed minutes reinforce December hike expectations, while caution ahead of BoE speeches may cap Sterling.
The Pound US Dollar (GBP/USD) exchange rate drifted higher on Tuesday as a more sanguine market mood limited the appeal of the ‘Greenback’.
At the time of writing, GBP/USD was trading at around $1.3239. A modest rise from Tuesday’s opening levels.
Pound to Dollar (GBP/USD): 1.327369 (+0.41%)
Dollar to Yen (USD/JPY): 158.15203 (+0.12%)
DAILY RECAP:
The US Dollar (USD) edged lower on Tuesday as an improvement in global risk appetite reduced demand for the traditional safe-haven currency.
A rally in equities, led by a tech-driven advance on Wall Street, helped encourage investors back towards riskier assets, while a pullback in oil prices provided some additional relief after elevated energy costs had contributed to recent market uncertainty.
The softer tone for the ‘greenback’ came despite the currency remaining close to multi-month highs. The US Dollar Index was hovering around 102.2 after gaining almost 1% last week, while elevated Treasury yields continued to provide a degree of underlying support for USD.
The Pound (GBP) traded in a narrow range on Tuesday morning ahead of a scheduled speech by Bank of England (BoE) policymaker Catherine Mann.
Mann was among a trio of policymakers who backed an immediate quarter-point increase at the central bank’s September meeting.
GBP Investors will be watching closely to see whether the Monetary Policy Committee’s (MPC) most prominent hawk will double down on the case for higher interest rates, with Sterling poised to rise if she signals support for a rate hike at the bank’s next meeting in November.
Near-Term GBP/USD Forecast: Hawkish FOMC Minutes to Support the ‘Greenback’?
Looking ahead to Wednesday, the primary catalyst of movement for the Pound to US Dollar (GBP/USD) exchange rate will be the publication of the minutes from the Federal Reserve’s September policy meeting.
USD investors will look to the minutes to better gauge the appetite within the bank for further interest rate hikes.
Barring an exceptionally hawkish tilt, they are unlikely to revive expectations for an October hike, but if they strengthen expectations that monetary policy may be tightened again in December the minutes may still prove positive for Sterling.
Meanwhile, the upside potential for Sterling in mid-week trade may be limited as traders keep their powder dry ahead of a packed slate of BoE appearances on Thursday, headlined by Governor Andrew Bailey.
Our currency coverage draws on live market data, official economic releases and published bank research.
