As the market questions the BoE’s hiking cycle, the value of the pound declines.
Due to a perceived difference between the US and UK central banks’ monetary policy stances, the Pound to US Dollar exchange rate suffered a setback on Tuesday.
BoE signals that are dovish add weight.
The recent increase in interest rates by the Bank of England did not help the pound since the institution said it was reaching the end of its cycle of rate increases. The Pound’s value decreased against the US Dollar as a result of this and comments made by former BoE policymaker Danny Blanchflower, who predicted a policy change and swift rate reduction later in the year owing to a “collapsing” property market.
As Powell’s speech approaches, the US dollar gains.
In contrast, currency traders are betting that the Federal Reserve will keep tightening monetary policy in light of positive non-farm payrolls statistics and expansion in the US services sector. Investors anticipating a speech by Fed Chair Jerome Powell supported the US Dollar, often known as the “Greenback.” The US dollar’s gains were however constrained by mixed market sentiment, with geopolitical worries offsetting a risk-on attitude in the European equities markets.
Forecast for the GBP/USD Exchange Rate: US Dollar Impact from Fed Speeches
Due to the dearth of economic data anticipated for Wednesday, attention will be paid to any cues the US central bank may give on potential future interest rate rises. The publication of statistics on the UK GDP growth rate for the fourth quarter of 2022, which will reveal whether the UK entered a recession at the end of last year, may have an impact on the Pound. On the other hand, the Pound may lack direction under light trading circumstances. The Pound may also be affected by any unfavorable news about the difficulties confronting the UK economy, such as the cost-of-living problem, labor unrest, and declining growth. The fluctuation of the GBP/USD exchange rate will be greatly influenced by the mood of the market.