Pound US Dollar Exchange Rate News: GBP/USD Fluctuates amid Mixed US Data

December 9, 2022 - Written by John Cameron

STORY LINK Pound US Dollar Exchange Rate News: GBP/USD Fluctuates amid Mixed US Data

GBP/USD Exchange Rate Wavers amid Mixed Trading Signals

The Pound to US Dollar (GBP/USD) exchange rate traded in a wide range on Friday amid new financial regulation in the UK and a lukewarm US data release.

At time of writing the GBP/USD exchange rate traded at around $1.2261, which was marginally higher than Friday’s opening levels.

US Dollar (USD) Mixed Post US PPI Data Release

The US Dollar (USD) traded in a broad range on Friday after a slight uptick following the release of the US producer price index.

November’s PPI rose by 0.3% month on month, beating market consensus that wholesale inflation would only rise by 0.2%. This release marked the third consecutive month where final demand rose in the US. In comparison, year-on-year PPI declined from an upwardly revised 8.1% to 7.4%, above forecasts of 7.2%.

As the year-on-year inflation has dropped this could be an indication that inflation has peaked in the US. However, the above-forecast figures indicate that inflation may be stickier than expected. This kept USD trading in a broad range on Friday as some investors await next week’s CPI release to better gauge the Fed’s next interest rate decision.

Elsewhere, USD found some support amid a mixed market mood. Geopolitical tensions were keeping investors cautious on Friday. Representatives from Russia and the US met on Friday afternoon. However, reports that the parties didn’t discuss the Ukraine war caused unease amongst investors.

Previous comments from Vladimir Putin this week have signalled the Kremlin has little desire to pursue peace talks. As tensions continued to rise, the ‘Greenback’ remained slightly insulated amid hesitancy among some investors.

Pound (GBP) Wavers Higher despite a Lack of Clear Impetus

The Pound (GBP) found itself supported on Friday, despite a lack of data. Reforms put forward by the UK Treasury could have supported GBP on Friday, although the initial market reaction was muted.

The Treasury plans to reform the rules and regulations governing the financial services industry in an attempt to make it more ‘innovative and competitive’. It is hoped that relaxing and reforming regulations will boost the UK’s finance sector, which will help grow the UK’s economy.

Chris Hayward, Policy Chairman at City of London Corporation, has said markets should be ‘excited’ about the potential the reforms have for the financial sector. He added:

‘It’s not a race to the bottom, in my view, it’s a chance to actually grow our economy and I think we should be very excited about it. It’s positive news for financial services’.

However, lingering doubts about the reforms kept the Pound’s upside limited on Friday. Many of the existing regulations were put in place following the 2008 financial crisis to protect the country from another crash.

GBP/USD Exchange Rate Forecast: Pound to Climb on GDP Data?

Looking ahead to next week, the Pound US Dollar exchange rate could be driven by key UK data.

October’s GDP growth rate is expected on Monday. Economic growth is forecast to grow by 0.4%, which would likely support GBP. However, if the data prints weaker than expected then Sterling could slip amid recession fears.

On Tuesday employment data could cause headwinds for the Pound. October’s unemployment rate is expected to increase from 3.6% to 3.7%. If true, this could further compound economic concerns.

Turning to USD, the American CPI is due next week. Headline inflation is expected to decrease from 7.7% to 7.6%. If true, this would provide further evidence that inflation in the US has peaked. This could mean the Fed pursue a smaller hike at their next policy meeting, which would likely dent the ‘Greenback’.

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