The Pound-Dollar could remain under pressure if Warsh reinforces Fed hike bets, while weak payroll revisions could open the door to a rebound.
The Pound US Dollar (GBP/USD) exchange rate slipped on Thursday as central bank speculation subdued the pairing.
At the time of writing, GBP/USD was trading at $1.3580, having crawled up from its eight-day low of $1.3572 but still down on the day.
DAILY RECAP:
The US Dollar (USD) remained supported on Thursday in the wake of Wednesday’s inflation figures, as markets adjusted bets on an interest rate hike from the Federal Reserve.
The latest core PCE price index – the Fed’s preferred measure of inflation – showed that price growth remains persistently above target, fuelling expectations that the American central bank will opt to hike rates in the coming months.
This continued to underpin USD into Thursday’s session.
Meanwhile, the Pound (GBP) struggled to hold its ground as markets pushed back bets on a Bank of England (BoE) interest rate hike to 2027, rather than late 2026.
Investors see the recent decline in global oil prices as decreasing the likelihood the BoE will raise rates this year, which in turn put modest pressure on the Pound.
Additionally, concerns about the rising cost-of-living in the UK subdued Sterling, following the news that the energy price cap would rise 4% in October and is forecast to increase even more in January.
Near-Term GBP/USD Forecast: Fed Bets in Focus
Looking forward, Federal Reserve interest rate expectations may remain in focus on Friday, with Fed Chair Kevin Warsh scheduled to deliver a keynote speech at the bank’s Jackson Hole symposium. The US will also release its annual revision to the non-farm payrolls figures.
Weak jobs data, coupled with a cautious message from Warsh, could cool expectations of further Fed rate hikes and pressure the US Dollar. On the other hand, stronger payrolls figures and a hawkish tone from the Fed chief may trigger a USD rally.
As for the Pound, UK data remains thin on the ground on Friday. This could leave GBP subdued once again.
Our currency coverage draws on live market data, official economic releases and published bank research.
