GBP USD Exchange Rate Set for First Weekly Gain in Four 

GBP USD Exchange Rate Gains Subdued by Soft Data 

The pound was choppy against the dollar this week, bobbing between the 1.21 and 1.23 ranges, with the currency’s gains tethered by ongoing economic uncertainty and political risk. 

Despite its inability to shift through the gears, the UK currency ticked up against a broadly weaker dollar on Friday, keeping it on course for its first weekly rise in four weeks. 

Helping it on its way was better-than-expected retail data which allowed it to shrug off mounting pressure on British Prime Minister Boris Johnson. 

Data released by the Office for National Statistics on Friday showed retail sales volumes in May dropped 0.5% month-on-month – a slightly smaller decline than the 0.7% fall forecast by economists – as consumers tightened their purse strings amid soaring inflation. GfK consumer confidence gauge sank to a record low this month, underscoring the scale of the cost-of-living crisis. 

The pound was little moved by the news that the Conservatives lost two parliamentary seats in by-elections on Thursday, a chastening blow for the ruling party that prompted the resignation of its chairman. 

Dollar slips as investors dial back rate bets

The dollar tripped up on Friday. It is set for its first weekly decline this month after inflation fears eased with falling oil and commodity prices. This prompted investors to reduce bets on where interest rates may peak, bringing rate cuts into the picture – conditions that eroded the dollar’s safe-haven appeal. 

At present, the Federal Reserve’s commitment to tame decades-high inflation is “unconditional,” Chair Jerome Powell explained during his grilling by lawmakers on Thursday. 

“We really need to restore price stability … because without that we’re not going to be able to have a sustained period of maximum employment where the benefits are spread very widely,” Powell told the House of Representatives Financial Services Committee during his second day of testimony. “It’s something that we need to do, we must do” he added.  

Speaking on Thursday, Fed Governor Michelle Bowman also banged the drum for a more aggressive path of rate hikes at “the next few” policy meetings after July. 

In remarks prepared for the Massachusetts Bankers Association conference, Bowman said: “Based on current inflation readings, I expect that an additional rate increase of 75 basis points will be appropriate at our next meeting as well as increases of at least 50 basis points in the next few subsequent meetings, as long as the incoming data support them,” 

“Depending on how the economy evolves, further increases in the target range for the federal funds rate may be needed after that.” 

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