Pound US Dollar Exchange Rate News: GBP/USD Firmed as US Data Disappoints

April 20, 2023 - Written by John Cameron

STORY LINK Pound US Dollar Exchange Rate News: GBP/USD Firmed as US Data Disappoints

US Dollar (USD) Soured amid Downbeat Economic Data

The US Dollar (USD) struggled for demand despite a cautious market mood. Another run of poor economic data disappointed, potentially curbing further interest rate hike bets from the Federal reserve. Preventing further losses are the maintained hawkish rhetoric from Fed policymakers.

The latest initial jobless claims surprised to the downside and gave further evidence that the one robust and tight labour market could finally be loosening. The US Department of Labor published data that revealed that there were 245,000 initial jobless claims in the week ending April 15. Far above market predictions of 240,000.

Meanwhile, the Fed Bank of Philadelphia’s manufacturing PMI fell to -31.3 in April, a substantial loss from -23.2 in March. The Fed’s publication added:

‘The prices paid index declined for the second consecutive month, falling 15 points to 8.2. The current prices received index fell 11 points to -3.3, its third consecutive decline and first negative reading since May 2020.

Further weighing on the ‘Greenback’ was the latest Beige Book from the Fed. Released two weeks prior to every policy meeting, the report gives a brief snapshot to how the Fed views the current economic climate. Hints of a stalling economy, the risk of a recession returns, the report also said:

‘Overall economic activity was little changed in recent weeks. Several districts noted that banks tightened lending standards amid increased uncertainty and concerns about liquidity.

‘Overall price levels rose moderately during this reporting period, though the rate of price increases appeared to be slowing.’

Pound (GBP) Supported by Elevated Rate Hike Expectations

Meanwhile, the Pound (GBP) was initially subdued on Thursday morning before finding its footing against a weaker US Dollar. With inflation remaining in double digits, the Bank of England (BoE) might not have much choice but to continue raising interest rates to rein in stubbornly high inflation.

Michael Saunders, former policymaker for the BoE, is confident that the central bank has at least one more hike left in them. With an expected decline in energy prices, which appear to be the main driver of inflation, Saunders is predicting inflation in the UK to sharply fall in the latter part of the year. He added:

‘I think they’re probably almost done now…. The big tightening cycle, of interest rates going up meeting after meeting, I think that’s largely over.’

GBP/USD Exchange Rate Forecast: Downbeat Retail Sales to Sour Sterling?

Looking ahead, the Pound US Dollar exchange rate could see further movement with the latest retail sales figures. An expected 0.5% fall, coming after two strong months of growth, could highlight the worsening cost-of-living crisis on consumers, and could spell trouble for the economy.

Meanwhile, a speech from Fed policymaker Christopher Waller could see the ‘Greenback’ climb if a hawkish tone is struck. Having only spoken a week ago, where he advocated further rate hikes, a similar approach could lift the US Dollar.

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TAGS: Pound Dollar Forecasts