GBP/USD Outlook: Pound to US Dollar Exchange Rate Slides Towards 1.25

November 22, 2024 - Written by James Fuller

STORY LINK GBP/USD Outlook: Pound to US Dollar Exchange Rate Slides Towards 1.25

The Pound US Dollar exchange rate treaded water on Thursday despite the UK’s latest borrowing figures outpacing estimates.

At the time of writing, GBP/USD was trading at approximately $1.2641, virtually unchanged from the start of Thursday’s session.

The Pound (GBP) stumbled against most currencies on Thursday after the UK's latest government borrowing figures were released.

According to the Office for National Statistics (ONS), UK government borrowing exceeded expectations, hitting £17.4bn in October, significantly higher than the predicted £12.3bn.

This news put pressure on GBP exchange rates, highlighting the limited fiscal manoeuvring room available to the UK Chancellor ahead of the spring statement.

Jessica Barnaby, Deputy Director for Public Sector Finances at ONS, commented:

‘This month’s borrowing was the second highest October figure since monthly records began in January 1993. Despite the cut in the main rates of National Insurance earlier in 2024, total receipts rose on last year. However, with spending on public
services, benefits and debt interest costs all up on last year, expenditure rose faster than revenue overall.’

The US Dollar (USD) edged higher against most currencies on Thursday, bolstered by a sense of caution sweeping through the markets.

As a prominent safe-haven currency, the USD tends to gain strength during uncertain trading conditions.

With tensions rising in the Russia-Ukraine conflict, markets favoured safer currencies on Thursday, thereby boosting the US Dollar’s demand.

Looking forward, the main driver of the Pound US Dollar exchange rate on Friday is anticipated to be the release of November's PMI data from both the UK and US.

In the US, the latest PMI data is expected to present a mixed picture, with the services index predicted to rise while the manufacturing index is likely to remain below 50, indicating contraction.

If the data aligns with these expectations, USD exchange rates may fluctuate during Friday's European trading session.

Meanwhile, the UK is also due to release its preliminary PMI figures for November. With the manufacturing sector poised to enter growth territory (signalled by a reading above 50) and the key services index expected to maintain its level at 52, these
outcomes could give the Pound a modest lift towards the week's end.

However, the UK is also set to publish its latest retail sales figures, which are expected to show a decline from 0.3% to -0.3%. This could potentially weaken GBP exchange rates following the release.

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TAGS: Pound Dollar Forecasts