Market Rout and Trump Criticism Sees GBP/USD Gains
The Pound (GBP) has risen against the US Dollar (USD) today after a volatile 24 hours in the financial markets that has seen US equities plunge and bond yields spike.
The latest Dollar selloff comes after President Donald Trump criticised the Federal Reserve’s planned series of rate hikes, saying Fed Chair Jerome Powell was ‘making a big mistake’ and calling his monetary tightening policy ‘ridiculous.’
Although the US President has no say in Federal Reserve policy, his comments may have alarmed USD investors who could fear that Trump may bring political pressure on the central bank to ease off on its monetary tightening schedule.
USD/GBP Exchange Rate: Inflation Stats Disappoint as Traders Weigh Up Fed Rate Hike Path
Meanwhile, the US Dollar (USD) has sunk around 0.20% against the Pound (GBP) today.
Yesterday, Fed Chicago President Charles Evans gave a speech, although there was nothing surprising in the content.
This afternoon has seen a raft of inflation statistics from the US, with most figures printing below expectations.
One of the more important indicators, the consumer price index excluding food and energy for September, printed at 2.2% year-on-year, which was below expectations of 2.2% and down from the previous month’s figure of 2.2%.
Any sign of slowing inflation in the US economy – which some analysts have recently described as ‘overheating’ – may lower expectations of the pace of rate hikes from the Federal Reserve.
As the base and core annual readings print move closer to the Federal Reserve’s 2 per cent inflation target range, the pace of additional interest rate hikes could lessen.
Such sentiment is one reason USD has dropped against GBP and other majors this afternoon.
GBP/USD Outlook: Pound to Gain on Dollar if Michigan Consumer Confidence Disappoints?
The next economic data release of note from the US will be tomorrow’s Michigan Consumer Sentiment Index.
Current expectations are for the index to show a slight improvement, moving up from 100.1 in September to 100.4 this month, but if today’s US inflation data is an indication, any below-forecast result could send the US Dollar (USD) lower.
There will also be a monthly budget statement and a speech by Fed Atlanta President Raphael Bostic, although neither is likely to provide any GBP/USD moving surprises.
A lack of UK data means that GBP is likely to be driven by political considerations for the rest of the week, with any positive news regarding Brexit ahead of next week’s EU meeting likely to drive the Pound (GBP) sharply higher.
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