Pound-Dollar could remain under pressure if US inflation strengthens Fed hike expectations, while Sterling lacks a clear domestic catalyst.
The Pound US Dollar (GBP/USD) exchange rate drifted lower on Tuesday as the market mood remained downbeat.
At the time of writing, GBP/USD was trading at around $1.3227. Down around 0.2% from Tuesday’s opening levels.
Pound to Dollar (GBP/USD): 1.320952 (-0.33%)
Dollar to Yen (USD/JPY): 157.50041 (+0.09%)
DAILY RECAP:
The US Dollar (USD) firmed on Tuesday as elevated energy prices continued to underpin demand for safe-haven assets.
Brent crude remained well above $100 a barrel on Tuesday amid ongoing uncertainty surrounding efforts to end the US-Iran conflict and negotiations to reopen the Strait of Hormuz.
The ‘Greenback’ continued to be supported by hawkish Federal Reserve interest rate expectations, with investors pricing in a 72% chance of the US central bank delivering another 25bps rate hike in October.
However, the upside in USD remained relatively modest on Tuesday morning as investors awaited the publication of the latest JOLTS job opening data, a drop in which could temper Fed rate bets.
The Pound (GBP) traded without clear direction on Tuesday, drifting sideways against major peers as a barren domestic data calendar left investors short of concrete economic cues.
Adding to the subdued mood, market participants were hesitant to take large directional positions ahead of Prime Minister Andy Burnham’s keynote address at the Labour Party conference.
Speculation suggests that Burnham will address long-debated reforms to the pension triple lock, as well as outlining his stance on the UK rejoining the European Union, the latter potentially striking a constructive tone with currency traders.
Near-Term GBP/USD Forecast: Rising US Inflation to Boost the ‘Greenback’?
Looking ahead, the primary catalyst of movement for the Pound to US Dollar (GBP/USD) exchange rate on Wednesday is likely to be the publication of the core PCE price index.
The Federal Reserve’s preferred inflation indicator is forecast to have climbed again in August, which will likely lift the ‘Greenback’ as it cements expectations for an October rate hike from the US central bank.
Over in the UK, finalised second-quarter GDP figures are scheduled for release on Wednesday, but unless the reading delivers a surprise revision, Sterling will likely take its cues from broader risk appetite across global markets.
Our currency coverage draws on live market data, official economic releases and published bank research.
