The Pound to Dollar exchange rate came under renewed pressure after the latest UK GDP figures unexpectedly showed the economy stalled in January, reinforcing demand for the stronger US Dollar.
Pound to Dollar (GBP/USD): 1.32661 (-0.64%)
Euro to Dollar (EUR/USD): 1.14444 (-0.66%)
Dollar to Japanese Yen (USD/JPY): 159.3825 (+0.09%)
DAILY RECAP:
The US Dollar (USD) remained broadly supported as markets continued to navigate volatile energy prices and geopolitical developments in the Middle East.
Recent sessions have seen sharp swings in the ‘Greenback’ as investors respond to new developments surrounding the US-Israel conflict with Iran.
US President Donald Trump has attempted to calm markets by claiming the war could end “very soon”. However, the situation on the ground has continued to escalate, keeping investors cautious.
Energy markets have also remained highly volatile. Attacks on energy infrastructure in the region have pushed oil prices higher, although attempts to stabilise the market have limited the most extreme gains.
The International Energy Agency has indicated member nations stand ready to release strategic oil reserves in an effort to offset supply disruptions and prevent prices from surging further.
Despite these efforts, traders remain wary of additional shocks to global energy supplies, which has continued to support demand for safe-haven assets such as the US Dollar.
Meanwhile, the Pound (GBP) struggled following the release of the latest UK GDP data.
Official figures showed the UK economy failed to grow in January, with output unchanged month-on-month after a 0.1% expansion in December. The reading missed expectations for a 0.2% rise and reinforced concerns the UK remains stuck in a sluggish growth environment.
The weaker-than-forecast GDP print weighed on Sterling sentiment and helped drive the Pound lower against the stronger US Dollar.
At the same time, the surge in global energy prices continues to complicate the Bank of England’s policy outlook.
Higher energy costs risk slowing economic growth while simultaneously increasing inflation pressures, creating a difficult balancing act for policymakers.
This combination of weak growth data and persistent inflation risks has left the Pound vulnerable to shifts in global risk sentiment.
Near-Term GBP/USD Forecast: US Inflation Data in Focus
Looking ahead, US economic data could play an important role in shaping near-term movement in the Pound to Dollar exchange rate.
Markets will closely watch the latest core PCE price index – the Federal Reserve’s preferred measure of inflation.
If the data shows inflation remains elevated, expectations that US interest rates will stay higher for longer could provide additional support to the US Dollar.
The US currency may also draw strength from a projected rebound in durable goods orders and an increase in job openings.
However, a forecast deterioration in consumer sentiment could limit USD’s upside.
At the same time, developments in the Middle East remain a key source of volatility for global markets. Any escalation or signs of diplomatic progress could quickly influence risk appetite and drive further movement in the GBP/USD exchange rate.
