ExchangeRates.org.uk - The US Dollar (USD) faced headwinds on Monday amid a lack of macroeconomic releases in the US. Elsewhere, a spell of risk-averse trade coupled with a slight dip in US Treasury yields further deterred investor interest in the safe-haven ‘greenback’, leaving USD as a less than favourable investment option throughout much of Monday’s session. In addition to this, ramped up expectations that the Federal Reserve could begin to lower interest rates as soon as September 2024 continued to hamper USD exchange rates. While Fed policymakers have maintained a hawkish consensus in recent weeks, the CME FedWatch Tool now shows an almost 60% chance that the central bank will begin to loosen its monetary policy during the third quarter of 2024, with an increased number of economists now leaning towards this narrative.
Sujan Hajra, Chief Economist & Executive Director at Anand Rathi Shares and Stock Brokers, commented: ‘We expect the Fed to begin cutting rates by September 2024, in line with the consensus forecast.’
Pound (GBP) Mixed following CBI Data
The Pound (GBP) traded in a wide range against its major rivals on Monday, while firming against the US Dollar (USD) amid a shifting market sentiment. Amid a lack of high-impact UK releases as the week opened, the Confederation of British Industry’s (CBI) latest industrial trends orders were pulled into focus. The survey showed that the total order book balance in June rose to -18, beating expectations of -25 and rising from -33 in May. The survey reached a three-month high this month, lending GBP some modest support, however, despite output forecasts reaching their highest level since October 2023, export orders fell to their lowest level since February 2021.
Ben Jones, Lead Economist at the CBI, said: ‘It's encouraging to see that manufacturers remain confident the economy is heading in the right direction and our June survey suggests that the recovery should broaden out over the summer. One note of caution is that order books remain soft. The sharp deterioration in export order books is particularly striking and is something to keep an eye on in the coming months.’
Elsewhere, last week’s dovish Bank of England (BoE) interest rate hold served to further hamper GBP against most of its peers, as firm expectations of an August interest rate cut persisted. However, an increasing appetite for risk appeared to be cushion GBP’s downside as the session progressed, due to its status as an increasingly risk-sensitive currency. buoying Sterling against its safe-haven rivals.
Pound US Dollar Exchange Rate Forecast: US Speeches in Focus
Looking ahead, a number of Fed policymakers are set to speak throughout the week, beginning with Mary Daly on Monday night. Should any rate-setters strike hawkish, the ‘greenback’ could garner some investor support amid signs that the Fed’s hawkish consensus still remains firmly intact, despite dialled up market projections. Looking to the UK, a lack of notable releases in the coming days could see GBP trad primarily in alignment with global risk dynamics. Should Monday’s increased appetite for risk persist, GBP may strengthen against its rivals. However, gloomy trade may leave GBP rudderless against its safe-haven rivals.
This content was originally published on ExchangeRates.org.uk
