The Pound-Dollar rate could face renewed pressure if US inflation strengthens Fed hike bets, while cautious BoE commentary may limit further Sterling gains.
The Pound US Dollar (GBP/USD) exchange rate rallied on Monday, with a risk-on market mood weighing heavily on the safe-haven ‘Greenback’.
At the time of writing, GBP/USD was trading at $1.3410, up almost 0.5% on the day.
Pound to Dollar (GBP/USD): 1.341427 (+0.46%)
Dollar to Yen (USD/JPY): 158.04505 (-0.28%)
DAILY RECAP:
The US Dollar (USD) stumbled on Monday as a risk-on rally in markets undermined the safe-haven ‘Greenback’.
Risk sentiment improved as equity markets rebounded following last week’s AI stock sell-off, with Friday’s positive US jobs data helping to alleviate fears.
In addition, hopes for peace in the Middle East cheered investors as US President Donald Trump was set to meet with the Prime Minister of Qatar – a key mediator between Washington and Tehran.
This fuelled hopes for a diplomatic resolution to the conflict, with oil prices retreating towards the two-month lows struck in the wake of last week’s mid-term elections.
The Pound (GBP) strengthened against many of its peers on Monday as Sterling continued attracting support from last week’s hawkish Bank of England (BoE) decision. Policymakers voted unanimously to raise interest rates and signalled that further increases could follow.
GBP may also have benefited from positioning ahead of Thursday’s UK third-quarter GDP figures, which are expected to show that economic growth accelerated.
Near-Term GBP/USD Forecast: Central Bank Expectations to Dent the Pairing?
Looking ahead, the latest US consumer price index is in the spotlight on Tuesday. The CPI figures are forecast to show that headline inflation accelerated from 3.7% to 3.9% in October, while core inflation rose from 2.6% to 2.8%.
If the data prints as expected, it will likely fuel bets that the Federal Reserve will raise interest rates next month, which in turn could boost the US Dollar.
Meanwhile, speeches from two BoE policymakers could influence the Pound on Tuesday.
Comments from Clare Lombardelli in the afternoon and Chief Economist Huw Pill later in the evening may influence Sterling. If either official pushes back against market expectations of multiple interest rate hikes, GBP could struggle to make further progress.
Our currency coverage draws on live market data, official economic releases and published bank research.
