The Pound-Dollar could remain under pressure if US-China tensions lift safe-haven demand, while dovish BoE remarks may add to Sterling’s losses.
The Pound US Dollar (GBP/USD) exchange rate sank to its worst levels since late July on Wednesday as hawkish Federal Reserve rate bets continued to underpin USD demand.
At the time of writing, GBP/USD was trading at around $1.3290. Down roughly 0.4% from Wednesday’s opening levels.
Pound to Dollar (GBP/USD): 1.324388 (-0.74%)
Dollar to Yen (USD/JPY): 158.22559 (+0.47%)
DAILY RECAP:
The US Dollar (USD) maintained a positive trajectory on Wednesday, with the currency continuing to draw support from expectations of further interest rate increases from the Federal Reserve.
The Fed’s hawkish shift following last week’s 25-basis-point rate hike has encouraged markets to price in another increase before the end of the year.
Recent comments from Fed policymakers have reinforced this outlook. Boston Fed President Susan Collins argued that a somewhat more restrictive policy stance is needed to bring inflation sustainably back to the central bank’s 2% target, while other officials have also warned that persistent inflationary pressures could warrant further tightening.
At the same time, lingering geopolitical uncertainty also continued to support USD demand, particularly after an, at times, inflammatory speech from US President Donald Trump at the United Nations General Assembly on Tuesday.
The Pound (GBP) lost ground on Wednesday after fresh survey data revealed a noticeable loss of momentum across the UK’s dominant services industry.
September’s flash PMI figures showed services activity sinking to a three-month low of 51.7, retreating further than the anticipated slip to 52 from August’s 52.5 reading.
Although the sector managed to stay on the right side of the 50.0 expansion line, the drop in pace arrives alongside stubbornly sticky input costs.
Mounting cost pressures continue to make the case for near-term Bank of England (BoE) action, but flagging service activity throws a wrench into the works.
Walking the line between snuffing out persistent inflation and avoiding outright economic stagnation remains an increasingly fraught task for Threadneedle Street.
Near-Term GBP/USD Forecast: Trump-Xi Meeting in the Spotlight
Looking ahead to Thursday’s session, the next major catalyst of movement for the Pound to US Dollar (GBP/USD) exchange rate may be Trump’s meeting with his Chinese counterpart XI Jinping.
Markets are unsure what to expect from the latest face-to-face between the leaders of the world’s two superpowers, but any signs of tensions could rattle markets and underpin demand for safe-haven assets such as the ‘Greenback’.
GBP investors, meanwhile, will be focused on Thursday’s speech from Bank of England policymaker Swati Dhingra.
As one of the most dovish voices on the Monetary Policy Committee (MPC), any cautious remarks questioning the wisdom of higher borrowing costs could trigger another move lower for Sterling.
Our currency coverage draws on live market data, official economic releases and published bank research.
