Pound US Dollar Exchange Rate Dips to $1.21

January 14, 2025 - Written by David Woodsmith

STORY LINK Pound US Dollar Exchange Rate Dips to $1.21

The Pound to Dollar rate (GBP/USD) declined further on Tuesday as persistent worries about the UK economy unnerved investors.

The Pound (GBP) faced renewed selling pressure on Tuesday amid ongoing concerns about the UK’s economic trajectory.

Although UK bond yields retreated slightly from Monday’s near-three-decade highs, fears about the country’s fiscal stability lingered.

Investors are increasingly convinced that Chancellor Rachel Reeves will be forced to introduce new spending cuts in the upcoming spending review on 26 March.

These anticipated austerity measures have led to doubts about the government’s ability to meet its growth targets, further dampening confidence in the Pound.

US Dollar (USD) Exchange Rates Steady Despite Softer PPI Data

The US Dollar (USD) held its ground against the Pound on Tuesday, although its broader performance was subdued following a disappointing Producer Price Index (PPI) release.

December’s PPI figures showed an annual rise of 3.3%, slightly below the forecast of 3.4%.

Additionally, the USD faced headwinds as improving market risk sentiment reduced demand for the safe-haven currency. A rebound in investor risk appetite, following Monday’s correction in the US Dollar, kept gains in check.

Looking forward, the GBP/USD exchange rate is likely to see volatility as attention shifts to inflation data from both the UK and US.

The UK’s CPI figures, due first, are expected to show that inflation continued to rise in December.

While this could delay expectations for further interest rate cuts from the Bank of England (BoE), it may also exacerbate concerns about the UK bond market, adding pressure to Sterling.

Later in the session, US inflation data could provide a fresh catalyst for the US Dollar.

If the CPI release reports confirm an uptick in price pressures, it could bolster bets that the Federal Reserve will maintain higher interest rates for longer, potentially driving the USD to new highs.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Dollar Forecasts