GBPUSD Likely to Experience High Volatility Amid GDP and PCE News
The value of the British Pound (GBP) and the US Dollar (USD) has fluctuated widely over the previous week in response to critical economic data and events. The recent UK inflation print slowed progress toward the rate hike the Bank of England and the Federal Reserve announced. Both the annual inflation rate and the Core CPI came in higher than expected at 10.4% and 6.2%, respectively. The double-digit print might have disastrous effects on GBP at these levels.
Since the US banking crisis has made it harder for the Fed to maintain its aggressive rate path, many now anticipate a rate cycle break at the May meeting.
The focus of risk sentiment now shifts to the imminent release of Core PCE data. In the UK, there was a modest rise in retail sales and manufacturing PMI, which has positively impacted market sentiment. The next significant data print is the eagerly awaited GDP growth rate, with its release scheduled for March 31st, Friday.
However, the Bank of England’s inability to raise interest rates due to high inflation could result in weaker pound sterling. Meanwhile, the Federal Reserve’s cautious stance on interest rates may also put downward pressure on the US dollar. As a result, the GBP/USD exchange rate can experience increased volatility.
The factors that underpin the market are still the primary force driving price movements, but concerns about the risk of financial trouble spreading throughout the banking industry have kept policymakers and individuals watchful. This week, both Deutsche Bank and UBS have experienced further declines in their stock prices, leading to increased anxiety about a potential recession. While the US Dollar is generally regarded as a reliable currency in times of uncertainty, recent developments have favored currencies that have not yet been significantly affected by the crisis.