Pound US Dollar (GBP/USD) Exchange Rate Slips as Investors Anticipate UK Fiscal Plan

November 17, 2022 - Written by John Cameron

STORY LINK Pound US Dollar (GBP/USD) Exchange Rate Slips as Investors Anticipate UK Fiscal Plan

Pound US Dollar (GBP/USD) Exchange Rate Falls as Investors Await Autumn Statement

The Pound US Dollar (GBP/USD) Exchange Rate fell on Thursday, as investors remained cautious ahead of the publication of Chancellor Jeremy Hunt’s Autumn Statement.

The cautious mood saw GBP/USD fall to around US$1.1885, a decline of roughly 0.2% from Thursday’s opening rates.

Pound (GBP) Muted as Investors Remain Cautious about Autumn Statement

The Pound (GBP) endured mixed trade on Thursday, as investors awaited the details of Chancellor Jeremy Hunt’s Autumn Statement.

Due at 12:30, the budget is expected to include a raft of spending cuts and tax hikes, prompting austerity’s return.

The caution comes as analysts anticipate a gloomy report alongside the budget from the Office for Budget Responsibility (OBR). With the aim to continue restoring market credibility and recover a fiscal ‘black hole’, analysts remain cautious about it’s potential.

Susannah Streeter, Senior Investment and Markets Analyst for Hargreaves Lansdown explored this. She stated: ‘The government hopes to fill in the fiscal ‘black hole’ which has emerged because successive Conservative ministers have said they want to see net debt falling by 2025-2026. Sunak and Hunt are trying to dance to a tune they think the bond markets are playing, but by keeping so strictly to their perceived rules, they risk playing it too safe, and pushing the prospects of economic recovery far into the distance.’


With the economic outlook for the UK continuing to darken, the Autumn Statement will play a vital role today. Having to balance both fiscal debt, market reputation and a cost-of-living crisis is keeping investors away from immediate support for Sterling.

However, Sterling was cushioned by Wednesday’s testimonies from various Bank of England (BoE) policymakers. Chiefly, BoE Governor Andrew Bailey testified to the UK Treasury Select Committee and stated that future rate hikes were to be expected.

US Dollar (USD) Sees Capped Gains from Shifting Rate Hike Expectations

The US Dollar (USD) enjoyed modest gains on Thursday, as Federal Reserve policymakers reiterated the Central Bank’s desire to curb inflation.

While the Fed is committed to continual tightening, the focus firmly shifted towards slowing the pace of hikes as the US economy showed a mixed picture. While the consumption-based nature of the economy was lifted by hotter than expected retail sales date, a surprise contraction in industrial production mollified the ‘Greenback’s appeal.

San Francisco Federal Reserve President Mary Daly made moves to reassure investors that rate hikes were still on the table. She stated in an interview that: ‘Pausing is off the table right now. It’s not even part of the discussion. Right now, the discussion is rightly around slowing the pace and ... focusing our attention really on what is the level of interest rates that will end up being sufficiently restrictive.’

Further supporting the safe-haven US Dollar on Thursday was ever-present geopolitical tensions. The Ukraine-Russia conflict continued to play on the minds of investors, following the missile attack in Poland which resulted in two deaths. While the incident has now been considered an unfortunate accident, the threat of escalation remains present and allows the ‘Greenback’ to gain support.

Pound US Dollar Exchange Rate Forecast: UK Retail Data to Boost Sterling?

Looking beyond the Autumn Statement for the Pound US Dollar (GBP/USD) exchange rate, the main focus point for investors could be Friday’s UK retail data.

An uptick in October’s retail sales has been forecast for the UK, which could lend support to GBP if they come to pass. The rise can be seen as a sign of optimism for UK retail, which has endured months of weak performance.

For USD, speeches from Fed officials such as Governor Michelle Bowman may be the core catalysts of movement. Clarity from Fed Bowman around the central bank’s stance on rate hikes may lend the ‘Greenback’ further support.

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