Pound US Dollar Exchange Rate News: GBP/USD Fluctuated amid UK Housing Market Slowdown

January 11, 2023 - Written by John Cameron

STORY LINK Pound US Dollar Exchange Rate News: GBP/USD Fluctuated amid UK Housing Market Slowdown

Pound (GBP) Subdued amid Ever-Downbeat Domestic Issues

The Pound (GBP) once again struggled for demand in a week relatively devoid of economic data. Leaving Sterling vulnerable to domestic woes, the UK’s largest house builder compounded those issues with a stark warning.

As mortgage approvals continue to slide, along with house prices, Barratt warns of a ‘marked slowdown’ in the housing market. A maelstrom of economic and political headwinds impacted the sector in the past six months, and uncertainty is set to weigh on the housing market for the next six months. David Thomas, Chief Executive of Barratt, said of the dire situation:

‘Political and economic uncertainty impacted the first quarter; this was then compounded by rapid and significant changes in mortgage rates which reduced affordability, homebuyer confidence and reservation activity through the second quarter.’
Barratt has also halted recruitment and scrapped over 3000 plot proposals ahead of an uncertain 2023, with expectations of the slump to continue.

Elsewhere, prolonged industrial action continues to weigh heavily on both the economy and the Pound. In the wake of the government’s controversial ‘anti-strike’ bill proposal, rail union leaders have said strikes will continue for the ‘long haul’. Asked whether they are closer to an agreement, union bosses have responded with they are in fact ‘further away than when we started.’

US Dollar (USD) Choppy Ahead of Crucial Inflation Data

Meanwhile, the US Dollar (USD) remained fairly quiet ahead of Thursday’s key headline CPI data. With expectations of inflation softening to 6.5%, investors remain cautious of moves before.

A maintained hawkish stance from the Federal Reserve has done little to inspire investors, as the latest speech from Fed Chair Jerome Powell proved. In a speech for Sweden’s Riksbank, Powell gave little hints towards monetary policy, but did talk of the importance of price stability. He added:

‘Price stability is the bedrock of a healthy economy and provides the public with immeasurable benefits over time. But restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy.’

With trading conditions thin on the ground until the inflation data is released, the ‘Greenback’ looks to be left to trade on market sentiment alone.

GBP/USD Exchange Rate Forecast: Softening US Inflation to Lift the Pound?

Looking ahead, the Pound US Dollar exchange rate could fluctuate further with the release of the latest inflation figures in the US. An expected softening to 6.5% might be a good sign for global market sentiment, but the ‘Greenback’ could slide on reduced rate hike bets.

Meanwhile, trading conditions remain thin on the ground for Sterling, so investors could be looking towards Friday’s GDP growth data. However, an expected shrinking of the UK economy could only serve to pile more pressure on the flagging Pound.

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TAGS: Pound Dollar Forecasts