At the time of writing GBP/USD was trading at $1.2827, down approximately 0.3% from Tuesday’s opening rate.
The US Dollar (USD) edged higher on Tuesday following the latest JOLTs job openings release.
The data showed that a larger-than-forecast number of jobs were added by the US economy in May. Though marginally declining from May’s figures, the releases served to quell surmounting fears of a slacking US labour market.
The Bureau of Labor Statistics said: ‘Job openings increased in accommodation and food services (+120,000) and in state and local government, excluding education (+94,000). The number of job openings decreased in durable goods manufacturing (-88,000) and in federal government (-62,000)’
Furthermore, the latest US consumer confidence index surpassed market projections for July, indicating a continually robust US economy.
However, with the Federal Reserve due to deliver its latest interest rate decision on Wednesday, USD’s upside potential was somewhat limited, as surmounting Fed rate cut bets prevented any notable gains for the ‘greenback’.
Elsewhere, an increasing appetite for risk seemingly capped the safe-haven US Dollar’s upside potential.
Pound (GBP) Wavers amid Data Lull
The Pound (GBP) was largely subdued on Tuesday, with fresh economic data in short supply.
An ongoing lull on the British calendar saw Bank of England (BoE) interest rate cut speculations pulled into focus once again, ahead of the BoE’s looming monetary policy meeting, which is due to take place on Thursday this week.
Investors and economists alike continue to mull over whether the central bank is likely to begin its monetary unwinding cycle in August or September, as recent sticky services inflation and easing wage growth in the UK paint a muddied picture surrounding the BoE’s prospective forward path.
Ruth Gregoy, Deputy Chief UK economist at Capital Economics, is amongst those advocating for a September rate cut, stating: ‘The economy’s recent strength and the stickiness of services inflation leads us to think that the Bank of England will wait until its September meeting to cut interest rate.’
Pound US Dollar Exchange Rate Forecast: Fed takes the Spotlight
Looking ahead, the Federal Reserve is due to deliver its latest interest rate decision on Wednesday evening. While the central bank is widely expected to enact another interest rate hold, markets will be eager to assess the Fed’s forward guidance. Any signs of a dovish tilt amongst policymakers, or similarly, any suggestion that the Fed remains open to lowering interest rates at it September meeting, could see the ‘greenback’ tumble against its rivals.
Elsewhere, the Bank of England is also due to deliver its latest monetary policy update on Wednesday. While markets largely divided as to whether the central bank will enact its first interest rate cut since 2020, investors will be keen to analyse the BoE’s accompanying commentary and forward guidance, in order to better gauge the current consensus amongst rate-setters.
In the meantime, global risk dynamics may drive the Pound US Dollar currency pairing, with any bullish trading conditions likely to underpin the increasingly risk-sensitive Pound. Alternatively, gloomy trade could bolster USD, due to its safe-haven status.