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GBP USD Exchange Rate Drops into 1.20 Range 

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The pound showed signs of ending its losing streak against the dollar on Thursday morning. Investors appeared sanguine following the publication of official data showing a record shortfall in the UK’s current account deficit in early 2022 – helping the UK currency sneak into the 1.21 mid-range. 

The shortfall in the first three months of this year came from a ballooning deficit, which reached £51.7 billion or 8.3% of gross domestic product, official ONS data revealed. Economists forecast a deficit of just under £40 billion. 

Its rally blew off course, however, by persistent economic headwinds, causing the currency to slide into the 1.20 range for the first time since 15 June. 

Speaking on Wednesday at a European Central Bank conference in Portugal, the governor of the Bank of England (BoE), Andrew Bailey warned that UK inflation is likely to stay higher for longer than in other countries amid the energy crisis. 

“The key thing for us is to bring inflation back down to target and that is what we will do,” Bailey said. 

But as central bank officials attempt to rein in soaring inflation without further damaging the economy, the pound remains set to record its largest six-month decline against the dollar since 2016 – the year the British public voted to leave the EU. 

Dollar continues to benefit from safe-haven demand

The resurgent dollar continued to profit from safe-haven demand on Thursday, prompted by renewed worries about higher borrowing costs and a global recession. 

The US currency was also buoyed by labour market data, which suggested that conditions are moderating. 

Applications for US unemployment insurance fell by 2,000 to 231,000 in the week ended 25 June, the Labour Department reported Thursday 

Economists forecast new jobless claims would edge up to 230,000 from last week’s initial estimate of 229,000 – that figure was revised up to 233,000. 

Looking ahead

The S&P Global/CIPS purchasing managers’ index (PMI) for the UK manufacturing sector releases by the Chartered Institute of Purchasing and Supply and Markit Economics on Friday – forecast to  hold steady at 53.4. A reading above 50 signals expansion in the sector. 

A clutch of notable data sets are slated for release in the US on Friday: the S&P Global/CIPS Manufacturing PMI, the S&P Global Manufacturing PMI, and the ISM Manufacturing PMI – which is expected to decline from 56.1 in May to 55 in June, reflecting slower economic growth and lower confidence among businesses in the sector. 

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The post GBP USD Exchange Rate Drops into 1.20 Range  appeared first on Pound Sterling Forecast.


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