Pound US Dollar Exchange Rate News: GBP/USD Firms Ahead of US inflation Reading

February 10, 2022 - Written by John Cameron

STORY LINK Pound US Dollar Exchange Rate News: GBP/USD Firms Ahead of US inflation Reading

GBP/USD Trading Higher Ahead of US Inflation Reading

The Pound US Dollar (GBP/USD) exchange rate is edging higher today as US investors remain cautious ahead of this afternoon’s inflation reading.

At the time of writing, the GBP/USD exchange rate is trading at approximately $1.3567, up roughly by 0.3% from today’s opening levels.

US Dollar (USD) Tumbles Ahead of US Inflation Reading

The US Dollar (USD) is stumbling against the Pound (GBP) this morning as US investors trade cautiously ahead of this afternoon’s inflation reading.

January’s reading is forecast to print at 7.3%, up from December’s 7%.

Should this run true, it will be the highest reading since June 1982, and is likely to bolster the ‘Greenback’s appeal.

Inflation pressures are currently expected to remain an issue into the middle part of 2022, and the Federal Reserve’s Chair, Jerome Powell, has recently pledged to control rising inflation by any means necessary.

While a March hike from the Fed is pretty much guaranteed, the question is whether the US central bank will opt for a quarter point hike or a more aggressive half-percentage increase. A strong inflation reading could help to bolster the odds for the latter.

Bloomberg Economics said:

‘A 50bps hike is likely to receive serious consideration when Federal Reserve officials meet in March. CPI inflation will be another influential data point in that decision.

‘With energy and food prices still rising, Bloomberg Economics estimates that January inflation continued to exceed the average monthly run rate consistent with an annual 2% inflation target. We expect inflation to peak in February.’

Pound (GBP) Climbs as UK Aims to Eliminate Coronavirus Restrictions

The Pound (GBP) is rising against the US Dollar (USD) this morning as Boris Johnson aims to remove all coronavirus restrictions earlier than planned.

Johnson said:

‘Providing the current encouraging trends in the data continue, it is my expectation that we will be able to end the last domestic restrictions, including the legal requirement to self-isolate if you test positive, a full month early.’

The UK would be the first country to abolish all restrictions; this would support the UK economy and is, thus, bolstering GBP today.

On the other hand, the UK political jitters remain, capping GBP’s potential.

In addition to the recent ‘partygate’ scandal, ongoing Met Police investigations and Sue Gray’s damning report update, Brexit woes have since returned, weighing on Sterling.

Johnson has threatened to trigger Article 16 of the Northern Ireland protocol, should EU counterparts not show some ‘common sense.’

Liz Truss, the UK Foreign Exchange Minister, and Marcos Sefcovic, European Commission vice-president, are scheduled to meet at the end of this week to discuss how the NI protocol may be improved.

Moreover, the Pound is being further weighed on as UK investors await this evening’s speech by the Bank of England’s (BoE) Governor, Andrew Bailey.

GBP/USD Exchange Rate Forecast: US inflation in Limelight

Today, US inflation is likely to place pressure on the Pound US Dollar exchange rate.

In addition, US initial jobless claims are forecast to decline from 238K to 230K which may also buoy USD demand.

Tomorrow, the publication of the Fed Monetary Policy Report may also influence USD’s potential.

Meanwhile, the Pound is likely to remain susceptible to the UK political developments, as well as the contents of BoE’s Bailey’s speech this evening.

In addition, the UK’s GDP reading for December may negatively impact Sterling if growth contracted more than forecast and dragged on the Q4 GDP release.

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