ExchangeRates.org.uk - At the time of writing GBP/USD was trading at $1.2784, down approximately 0.2% from Tuesday’s opening rate. The US Dollar (USD) was largely subdued on Tuesday ahead of Fed Chair Jerome Powell’s Testimony, delivered mid-afternoon. During his Testimony, Powell stated that the US job market and US economy may face long term risks, should interest rates remain elevated for too long.
Powell remarked to the Senate Banking Committee: ‘After a lack of progress toward our 2% inflation objective in the early part of this year, the most recent monthly readings have shown modest further progress. More good data would strengthen our confidence that inflation is moving sustainably toward 2%. In light of the progress made both in lowering inflation and in cooling the labour market over the past two years, elevated inflation is not the only risk we face.’
Elsewhere, a mixed mood capped USD’s upside potential, due to its status as a safe-haven currency.
Pound (GBP) Buoyed by Labour Victory
A lack of fresh UK data left the Pound (GBP) largely vulnerable to post-election tailwinds, following the UK Labour Party’s landslide victory last Friday. A positive market reaction to Labour’s win served to keep Sterling afloat, as investors and economists alike were optimistic that a sense of British political stability could aid in restoring the UK’s safe-haven political and economic status. Stepping into her role as UK Chancellor, Rachel Reeves reaffirmed Labour’s focus fixing the fundamental foundations of the UK’s economic structure, seeking to enhance domestic economic growth.
Reeves commented: ‘Our manifesto was clear: ‘Sustained economic growth is the only route to improving the prosperity of our country and the living standards of working people’. Where governments have been unwilling to take the difficult decisions to deliver growth — or have waited too long to act — I will deliver. It is now a national mission. There is no time to waste. Growth requires hard choices. Choices the previous government has shied away from, and it now falls to this new Labour government to fix the foundations. There is no time to waste.’
Elsewhere, recent commentary from retiring Bank of England (BoE) policymaker Jonathan Haskel further buoyed GBP, as the central bank hawk suggested that the UK economy could withstand further restrictive policy in the months to come.
Pound US Dollar Exchange Rate Forecast: Central Bank Speeches in Focus
Looking ahead, speeches from senior central bank policymakers could drive notable volatility in the Pound US Dollar exchange rate. BoE Chief Economist Huw Pill is due to speak on Wednesday afternoon, with any dovish signals likely to sink Sterling. Additionally, Fed Chair Powell is set to speak once again, with any suggestions as to when the Fed may begin its unwinding cycle likely to fuel significant USD movement. Should Powell strike hawkish during his address, USD may garner some investor support.
This content was originally published on ExchangeRates.org.uk
