Pound to Dollar Rate | Recent History Says Prepare for a Post-CPI Bounce
PoundSterlingLIVE
Published Sep 13, 2023 11:48
Updated Sep 13, 2023 12:13
Pound to Dollar Rate: Recent History Says Prepare for a Post-CPI Bounce
PoundSterlingLIVE - Pound Sterling risks breaking to fresh three-month lows against the Dollar if U.S. inflation beats expectations later today, but recent history suggests the U.S. currency tends to weaken following inflation releases.
Due for release at 13:30 BST, U.S. inflation is expected to grow 3.6% year-on-year, with core tipped by economists to rise 4.3% y/y.
Should these figures be exceeded then the GBP/USD exchange rate would likely break below the regional support at 1.2440-1.2450 amidst a broader USD rally as investors raise the odds of a September rate hike and lower expectations for the scale of interest rate cuts likely in 2024.
"The release of the US CPI for August is expected to reveal a pick-up in headline inflation," says Lee Hardman, Senior Currency analyst at MUFG Ltd.
But Hardman says there would have to be a significant upside for inflation today to alter market expectations for the Federal Reserve's upcoming September decision, which sees markets overwhelmingly expecting rates to be kept on hold.
Of more interest will be what happens in 2024 when the Fed is expected to cut interest rates, a development that is widely tipped by analysts to weigh on the Greenback.
MUFG notes market pricing for the scale of cuts in 2024 has already been reduced owing to rising oil prices which are anticipated to rejuvenate inflationary trends.
Recent history meanwhile reveals the Dollar does tend to retreat in the immediate aftermath of inflation releases.
"Looking at price action around CPI report releases this year, the dollar index has weakened in the first 30 minutes after releases following the last six CPI reports," notes Hardman.
The Pound-Dollar rate could recover recently lost ground if the foreign exchange market respects the recent playbook, particularly if the figures undershoot expectations.
"While headline inflation is forecast higher, the core component, more relevant for next Wednesday’s FOMC meeting, is expected to drop. Barring upside surprises from data, the dollar should weaken," says Asmara Jamaleh, an economist at Intesa Sanpaolo (BIT:ISP) Bank.
An original version of this article can be viewed at Pound Sterling Live
Get The App
Written By: PoundSterlingLIVE
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.