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Pound US Dollar Exchange Rate News: GBP/USD Wavers amid Risk-On Mood

May 13, 2022 - Written by John Cameron

US Dollar (USD) Falters after Hitting Two-Year Highs



The US Dollar (USD) softened overnight after a shift in risk sentiment saw investors move from the safe-haven currency in the wake of news of the reopening of Shanghai.
Deputy Mayor Wu Qingat stated that the city is aiming for zero Covid infections by mid-May, with Shanghai opening back up, the easing of traffic restrictions and shops opening in a responsible manner.

However, despite the risk-on mood, the US Dollar managed to strengthen as European trade began. One factor that continues to underpin the ‘Greenback’ is the expectation that the Federal Reserve will aggressively hike rates in the coming months.

Providing some further about the Fed’s rate hike cycle, Federal Open Market Committee (FOMC) Chairman Jerome Powell reiterated that he expects the fed funds rate to rise by 50 basis points at each of the next two policy meetings. This is in contrast to the Bank of England (BoE), which has signalled that, while some more modest tightening may be needed, it is nearing the end of its tightening cycle.

Pound (GBP) Wavers Near Two-Year Lows



The Pound (GBP) slipped this morning, after rising overnight, as worries about the UK economy weigh heavily on the currency. Yesterday, the UK’s latest UK GDP release showed a 0.1% contraction, with fears of a recession mounting amid the bleak economic outlook.

Despite the modest gains Sterling enjoyed overnight against the US Dollar, GBP is on the back foot today.

GBP/USD Exchange Rate Forecast: Consumer Confidence to Dent the Dollar?



With the University of Michigan consumer sentiment data due out today, the ’Greenback’ could see its two-year high retreat. Economists expect consumer morale to drop in May, representing the impact of uncertainty amongst consumers. Economic fears of surging inflation and higher interest rates played a big role in the drop.

Without any UK data due out today, Sterling may be driven by news about the Northern Ireland protocol, with any negative headlines likely weighing on the Pound.
Further news from the government in tackling the cost-of-living crisis could also affect GBP.

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