Pound US Dollar (GBP/USD) Muted Following UK GDP Release

August 12, 2021 - Written by John Cameron

STORY LINK Pound US Dollar (GBP/USD) Muted Following UK GDP Release

Pound US Dollar (GBP/USD) Exchange Rate Flat on UK GDP

The Pound US Dollar (GBP/USD) exchange rate is trading in a narrow range this morning as markets digest the UK's latest GDP figures

At the time of writing, the Pound (GBP) is trading at $1.3876, virtually unchanged from this morning’s opening levels.

Pound (GBP) Flat on UK GDP Release as Other Data Disappoints

The Pound is mostly rangebound this morning as the latest UK GDP figures printed at 4.8% as forecast.

Activity and demand are seen to have increased following June’s evident struggle ahead of ‘Freedom Day’. Household consumption jumped 7.3%, while public spending advanced 6.1%; GDP arrived at 1.0% month-on-month in June versus 0.8% expected.

Additional data printed mixed, with industrial production contracting by 0.7% on account of falling activity within mining, quarrying, electricity and gas. Construction output also missed forecasts, while the UK balance of trade printed a greater deficit than expected.

While GDP is the most significant of the data released this morning, it’s likely that contractions in other areas will put some pressure upon trading sentiment. The Pound has sustained yesterday’s gains, but it has yet to find direction today- seemingly pressured by mixed sentiment.

US Dollar (USD) Sentiment Stifled as Investors Question Economic Recovery

The US Dollar is down against its peers this morning following yesterday’s publication of some disappointing inflation figures. While the annual core inflation rate met expectations, month-on-month figures retreated from June’s 0.9% high, causing USD investors to wonder whether inflation may have peaked.

If inflation has indeed levelled out, there is less pressure on the Federal Reserve to tighten monetary policy- a prospect which has dented the US Dollar.

The Fed’s Raphael Bostic announced on Monday that the bank could start to taper bond-buying between October and December as ‘substantial further progress' goal on inflation has effectively been met’; if higher inflation is now believed to be transitory, the tapering timeline could be pushed back.

Coming up later today is the recent initial jobless claims report, which is expected to show growth in the US labour market. This has the potential to boost the US Dollar back up against the Pound; although a predicted decrease in PPI would support the transitory inflation narrative and could suppress the ‘Greenback’ further.

Pound US Dollar Exchange Rate Forecast: GBP/USD Awaits US Jobless Claims

With no UK data left to print today, direction in the currency pair will likely be driven by US Dollar performance, in addition to external factors such as coronavirus.

US Jobless claims are likely to inspire movement, as an increase in employment would suggest economic recovery and consequently, may claw back favour for an imminent tapering forecast. Any negative coverage of the coronavirus situation could also help the US Dollar, as it may bring trading bears to the safe-haven currency.

Meanwhile, positive news of decreasing Covid cases may recoup support for the Pound. There will be no more UK data until next week, as Friday is dominated by US releases.

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TAGS: Dollar Pound Forecasts