Pound US Dollar Exchange Rate News: GBP/USD Softened on Waning Global Market Sentiment

Modified: Thursday, 15 September 2022 12:35 BST - Written by John Cameron

STORY LINK Pound US Dollar Exchange Rate News: GBP/USD Softened on Waning Global Market Sentiment

Pound (GBP) Under Renewed Pressure amid Persisting Cost-of-Living Crisis

The Pound (GBP) failed to find much demand amid a quiet day when the Bank of England (BoE) interest rate decision was due. After the buoyant mood in the wake of softening inflation, the Pound came under renewed pressure on Thursday as inflationary pressures still linger.

Lending some moderate support to Sterling was the continued expectation of a bold rate hike from the Bank of England (BoE). Despite a softening in headline CPI, core inflation continues to tick higher, pointing towards a sustained higher cost of living. Initially buoying investors on continued aggressive rate hikes, Sterling has come under renewed pressure as global recession fears continue unabated.

Despite China announcing that the People’s Bank of China (PBoC) are set to provide a boost to the economy in the form of a 200bn Yuan (£24.8Bn) as special lending funds to commercial banks. In an attempt to boost the flagging economy, the fiscal injection was not enough to quell mounting recession fears. With a souring global market mood, and no domestic data to go on, Sterling is likely to remain under pressure for the rest of Thursday’s session.

Meanwhile, the BoE’s quarterly survey was released, highlighting the public concern of inflationary pressures and waning confidence in the central bank’s fight on the cost-of-living crisis. Public confidence fell to -7 compared to -3 in May. Inflation expectations also grew to the highest since the survey began in 1999, with 4.9% for the year ahead.

US Dollar (USD) Buoyed on Safe-Haven Tailwinds

The US Dollar (USD) rallied against its peers after a subdued start to the week as the return of global recession fears inspired a wave of safe-haven flows.

As investors become more confident in a bold interest rate hike at next week’s Federal Reserve monetary policy meeting. 75bps are all but confirmed, with some expecting the central bank to follow the Bank of Canada’s (BoC) bold move of raising rates by a full 1%. Ahead of a flurry of crucial data, including retail sales which are set to show another month of stalling sales, the US Dollar could see a boost if data prints to forecast.

Meanwhile, the US railroads narrowly avoided a costly strike as workers reached a tentative deal with railroad organisations. A potential strike would have seen 30% of cargo shipments frozen, exacerbating inflationary pressures and would have costed the US $2Bn a day. President Joe Biden announced the deal, and said:

‘(The deal is) a win for tens of thousands of rail workers who worked tirelessly through the pandemic to ensure that America's families and communities got deliveries of what have kept us going during these difficult years.’

GBP/USD Exchange Rate Forecast: Flurry of US Data to Weigh on the Greenback?

Looking ahead to the rest of the day’s session, and a myriad of US data releases could see the ‘Greenback’ fluctuate. An expected stalling in retail sales could see the ‘Greenback’ slump, and if initial jobless claims reveal a rise in unemployment benefits, the US Dollar could be under further pressure.

Meanwhile, with many businesses closed on Monday for the Queen’s funeral, another slowdown in economic activity could weigh on the UK economy, and the Pound.

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TAGS: Pound Dollar Forecasts