Pound to US Dollar Exchange Rate Subdued following US Inflation Data

November 1, 2024 - Written by John Cameron

STORY LINK Pound to US Dollar Exchange Rate Subdued following US Inflation Data

The Pound US Dollar exchange rate treaded water on Thursday following the publication of the latest US core PCE price index.

At the time of writing, GBP/USD was trading at approximately $1.2975, virtually unchanged from the start of Thursday’s session.

The US Dollar (USD) faced challenges in attracting buyers against most of its counterparts on Thursday, even after the release of stronger-than-anticipated inflation data from the US.

The latest core PCE price index, which is the Federal Reserve's favoured measure of inflation, was published, and reported that the index maintained its position at 2.7%, surpassing market predictions of a slight decrease to 2.6%.

However, despite indications of persistent US inflation, the safe-haven 'Greenback' struggled to gain traction, even with the positive data release and a risk-averse market sentiment.

The Pound (GBP) demonstrated resilience against most of its counterparts on Thursday, even rallying against several riskier currencies, in the wake of the UK's much-anticipated Autumn budget release the previous day.

During her speech, UK Chancellor Rachel Reeves announced a series of predicted tax increases amounting to £40bn, which initially sent GBP exchange rates lower.

However, the Sterling found buoyancy later in the day as markets anticipated more gradual interest rate cuts from the Bank of England (BoE), helping Sterling steer clear of further volatility.

In the absence of domestic data releases on Thursday, the Pound's performance continued to be influenced by market sentiment surrounding Wednesday’s budget.

Looking forward, the key driver of the Pound US Dollar exchange rate on Friday is expected to be a series of important data releases scheduled from the US.

Kicking off the day, the US will publish its latest jobs data, including the highly anticipated non-farm payrolls figures and the latest unemployment rate.

Non-farm payrolls are predicted to show a significant slowdown this month, with the number of new jobs expected to drop from 254,000 to 115,000. However, the unemployment rate is anticipated to remain unchanged at a three-month low of 4.1%,
which could help mitigate any potential USD weakness.

In the afternoon, the US will also release its latest ISM manufacturing PMI index for October. If the data indicates another contraction in the manufacturing sector, the 'Greenback' could end the week on a softer note against its peers.

Meanwhile, the UK will also publish its final manufacturing PMI data for October. If the data meets expectations of a decline, GBP exchange rates could face new pressures at the end of this week.

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TAGS: Pound Dollar Forecasts