Pound US Dollar Exchange Rate Weakens

October 17, 2024 - Written by Frank Davies

STORY LINK Pound US Dollar Exchange Rate Weakens

The Pound US Dollar exchange rate lost ground on Wednesday following the publication of the UK’s latest consumer price index (CPI).

At the time of writing, GBP/USD was trading at approximately $1.3020, down roughly 0.4% from the start of Wednesday’s session.

The Pound (GBP) plunged against the majority of its counterparts on Wednesday after the UK's latest inflation figures were released.

The Office for National Statistics (ONS) reported that both headline and core inflation rates in September decreased more than anticipated.

Core inflation retreated to 3.2% from 3.6%, contrary to expectations of a 3.4% reading, while headline inflation slipped to 1.7% from 2.2%, missing the 1.9% forecast and undershooting the Bank of England (BoE)’s 2% target for the first time in three years.

Accordingly, markets increased bets on a BoE interest rate cut in November, which in turn weighed heavily on GBP exchange rates.

The US Dollar (USD) failed to capture investor interest on Wednesday, hampered by the absence of domestic data releases and increasing expectations of a Federal
Reserve interest rate cut.

With the next Fed interest rate meeting less than a month away, following the significant 50 basis point cut in September, markets are widely predicting another rate reduction in November.

According to CME's FedWatch Tool, there is nearly a 100% probability of a 25 basis-point cut next month, which left USD with little momentum in the face of scarce economic catalysts.

Thursday's key driver for the Pound US Dollar exchange rate is expected to be the release of the latest US retail sales figures.

September's data is predicted to show a modest uptick in consumer spending, with estimates suggesting a rise from 0.1% to 0.3%, potentially providing the USD with some mild support should the data print as expected.

Meanwhile, UK data releases are thin on the ground on Thursday, which could leave GBP exchange rates lacking momentum without any immediate economic triggers to prompt activity.

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TAGS: Pound Dollar Forecasts