Pound US Dollar Exchange Rate Fluctuates following UK Budget and US GDP

October 31, 2024 - Written by John Cameron

STORY LINK Pound US Dollar Exchange Rate Fluctuates following UK Budget and US GDP

The Pound US Dollar exchange rate wavered on Wednesday following the publication of the UK’s Autumn Budget and the US’s latest GDP data.

At the time of writing, GBP/USD was trading at approximately $1.2998, up almost 0.2% from the start of Wednesday’s session.

While the Pound (GBP) held its ground against the US Dollar (USD), it weakened against most other currencies on Wednesday following the unveiling of the UK’s much-awaited Autumn Budget.

The newly appointed UK Chancellor, Rachel Reeves, presented her fiscal plans, which included a series of expected tax hikes totaling £40bn.

This revelation caused Sterling to lose most of the gains it had accumulated in the days preceding the budget announcement.

However, an increase in borrowing helped to stabilize the Pound and prevented it from further declining against other currencies, as it could potentially fuel inflation and reduce the likelihood of interest rate cuts by the Bank of England.

The US Dollar (USD) maintained its ground against most currencies on Wednesday, even strengthening against several, following the release of the latest US GDP figures.

The third quarter GDP data showed a slight decline, with the index dipping from 3% to 2.8%, falling short of predictions that it would hold steady at 3%.

Nevertheless, the marginally lower-than-anticipated reading did not significantly impact the 'Greenback,' as the overall growth rate remained robust and did little to alter expectations for Federal Reserve interest rate cuts.

Looking forward, the main driver of movement for the Pound US Dollar exchange rate on Thursday is expected to be the release of more high-impact data from the US.

The United States will unveil its latest core PCE price index, which is the Federal Reserve’s favored inflation gauge, along with the nation’s newest initial jobless claims figures.

The upcoming core PCE price index is predicted to show a slight easing in US inflation, with the figure anticipated to decrease from 2.7% to 2.6%.

A slowdown in domestic inflation could intensify bets on Federal Reserve interest rate cuts and consequently weaken the US Dollar on Thursday, especially if coupled with an expected rise in last week’s initial jobless claims.

As for the Pound, the UK data calendar is empty for Thursday, leaving Sterling to trade based on the UK’s Budget announcement, which could potentially lead to further declines in the currency.

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TAGS: Pound Dollar Forecasts