British Pound to Dollar Rate Weakens following US CPI

September 13, 2024 - Written by John Cameron

STORY LINK British Pound to Dollar Rate Weakens following US CPI

The Pound US Dollar exchange lost ground on Wednesday following the publication of the US’s latest inflation data.

At the time of writing, GBP/USD was trading at approximately $1.3029, down roughly 0.4% from the start of Monday’s session.

The US Dollar (USD) remained stable against most of its peers on Wednesday following the release of the latest US inflation data.

August's headline inflation rate fell below market expectations, dropping from 2.9% to 2.5%, versus the forecasted 2.6%. However, core inflation stayed unchanged at 3.2%, in line with predictions.

The mixed consumer price index had minimal impact on Federal Reserve interest rate cut expectations ahead of next week’s decision, allowing USD to remain steady against the majority of its peers.

Gerrit Smit, Manager of the Stonehage Fleming Global Best Ideas Equity fund, comented: ‘Although largely driven by lower energy costs, the sharp drop in US headline inflation to 2.5% for August removes all uncertainty whether the Fed will start cutting their target rate at their meeting next week. Investor focus has already shifted from inflation to economic growth considerations.'

The pound (GBP) dipped against several of its peers on Monday, hobbled by the latest UK GDP report.

July’s figures disappointed market expectations, showing no growth at 0%, compared to an expected 0.2% rise.

This confirmation of economic stagnation in July saw GBP exchange rates struggle to catch bids in the aftermath of the release, weakening against some of its safer rivals.

However, as the data failed to strengthen expectations of a Bank of England (BoE) interest rate cut next week, the Pound’s losses were limited.

Looking ahead, the primary driver of movement for the Pound US Dollar exchange rate on Thursday will likely be the release of new US economic data.

The US is set to publish its August Producer Price Index (PPI), which is expected to show a slight increase of 0.1%. This could provide the US Dollar with some modest support.

Additionally, the latest initial jobless claims, covering the week ending September 7, will be also released on Thursday afternoon. If the data confirms a rise in unemployment claims, it could weaken USD exchange rates.

As for the Pound, with limited UK data on the horizon, GBP exchange rates may lack a clear directional basis.

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TAGS: Pound Dollar Forecasts