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Pound US Dollar Exchange Rate News: GBP/USD Rangebound Following the Queen’s Speech

May 10, 2022 - Written by John Cameron

GBP/USD Mixed as Queen’s Speech Delivered

The Pound US Dollar (GBP/USD) exchange rate is subdued as the Queen’s speech outlines how the UK government will support the UK economy.

At the time of writing, the GBP/USD exchange rate is trading at approximately $1.2349, with minimal movement from today’s opening levels.

Pound (GBP) Subdued amid the Queen’s Speech

The Pound (GBP) is flat against the US Dollar (USD) today, after Prince Charles delivered the Queen’s speech.

The royal speech addressed a number of key elements regarding the UK economy, including high energy costs and trade.

The Prince of Wales stated:

‘Her Majesty’s Government will continue to champion international trade, delivering jobs across the country and growing the economy. Legislation will be introduced to enable the implementation of the United Kingdom’s first new Free Trade Agreements since leaving the European Union.’

However, Brexit woes have returned since the landslide victory for Sinn Fein in Northern Ireland.

UK Foreign Secretary Liz Truss is reportedly preparing to eliminate elements of the Northern Ireland protocol.

Jenny Chapman, Labour’s Brexit spokesperson, has warned ‘the government’s threat to tear up the protocol risks a trade war’ with the EU.

In addition, the British Retail Consortium (BRC) reports the UK cost of living crisis has weighed on consumer spending.

According to the BRC, UK retail sales slipped by 0.3% in April amid soaring inflation.

Last week, the Bank of England (BoE) warned inflation may reach 10% by the end of 2022. This continues to undermine GBP exchange rates.

Paul Martin, UK Head of Retail, KPMG, stated:

‘The cost of living crisis came home to roost for retailers in April, with sales growth going into decline for the first time in 15 months.

‘With interest rates and inflation rising and the Bank of England warning of a possible recession, the squeeze on disposable household income is starting to have an impact on the high street.

‘Against a backdrop of falling consumer confidence, the retail sector has a bumpy time ahead as they face spiralling cost pressures from all directions.’

US Dollar (USD) Muted amid Global Recession Fears

The US Dollar (USD) is trading in a narrow range against the Pound (GBP) today as global markets remain unsettled by global recession fears.

This comes as China, the manufacturing capital of the world, maintains its ‘zero covid’ policy and keeps certain cities, including Shanghai, in lockdown.

In turn, this has caused China’s exports to reach a two-year low, placing renewed strain on global supply chains.

The weakening of supply chains, in addition to the Ukraine crisis and surging inflation, threatens to trigger a recession.

As a result, this is offering the safe haven ‘Greenback’ some limited support.

Later today, the US Dollar may be impacted by speeches from Federal Reserve policymakers John Williams and Raphael Bostic. Will a hawkish outlook support USD exchange rates?

GBP/USD Exchange Rate Forecast: Will US Inflation Hamper Fed Rate Hike Bets?

Looking ahead, the latest US inflation reading may boost the Pound US Dollar exchange rate.

In April, the US inflation is predicted to decrease from 8.5% to 8.1%. If market forecasts are met, it may ease rate hike bets and weigh on USD exchange rates.

The ‘Greenback’ may be influenced by a number of speeches from Fed policymakers throughout the week’s session. Should these policymakers strike a broadly hawkish tone, it may bolster demand for the US Dollar.

Later in the week, Sterling may be under pressure from the UK’s GDP figures. In the first quarter, the UK economic growth is predicted to slow from 1.3% to 1%.

Furthermore, the UK’s cost of living crisis, political uncertainty and Russia-Ukraine war are likely to continue undermining GBP exchange rates.

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