Pound to US Dollar Rate Choppy following BoE Bailey Remarks

December 5, 2024 - Written by Frank Davies

STORY LINK Pound to US Dollar Rate Choppy following BoE Bailey Remarks

The Pound US Dollar (GBP/USD) exchange rate wavered on Wednesday as a variety of factors saw Sterling trade in a wide range.

The Pound (GBP) faced fluctuations on Wednesday as shifting market sentiment, comments from the Bank of England (BoE), and fresh economic data drove mixed movements.

Sterling initially gained support from a risk-on mood in markets. However, it came under pressure following comments from BoE Governor Andrew Bailey, who projected four interest rate cuts in 2025 despite ongoing concerns about stubborn inflation.

The Pound avoided significant losses, though, as the UK’s final services PMI exceeded expectations. The index printed at 50.8, up from the preliminary estimate of 50. While this indicates that growth in the services sector nearly stalled in November, the activity managed to stay just within expansion territory, offering some relief to GBP.

The US Dollar (USD) saw mixed performance on Wednesday, strengthening against weaker counterparts despite a generally upbeat market mood.

The safe-haven ‘Greenback’ found support as markets continued to digest policy expectations under Donald Trump’s presidency and their potential impact on inflation and interest rates.

Trump’s pledge to impose substantial tariffs on trading partners and rivals – including Mexico, Canada, the EU, and China – has raised concerns about inflationary pressures. Such policies could compel the Federal Reserve to maintain higher interest rates for an extended period, bolstering demand for the US Dollar.

Pound US Dollar Exchange Rate Outlook: BoE and Fed Speeches to Boost GBP/USD?

Thursday’s agenda features speeches from policymakers at the Bank of England and the Federal Reserve, both of which could influence GBP/USD.

Federal Reserve official Thomas Barkin is expected to speak, and any indications of support for a December interest rate cut could weigh on the US Dollar. In contrast, hawkish comments from Bank of England rate-setter Megan Greene – particularly if she advocates keeping rates steady this month – may lend support to Sterling.

Additionally, the release of the latest US initial jobless claims data could impact USD. If claims remained steady in the week ending 30 November, this could signal a resilient labour market, providing some support for the Greenback.

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TAGS: Pound Dollar Forecasts