Best GBP to USD Rate Could Have an Unstable Period

As it currently stands, the trading for the GBP/USD currency pair has been tight this Monday. This is because of the bank holiday in the UK. Going into the next day, Tuesday, the best GBP to USD rate is at 1.26. This is actually quite a bit lower than it had been not too long ago, reaching 1.28 in the last month and a high of 1.31 in the beginning of 2023.

There are a number of reasons we can consider to explain this phenomenon. The recent lack of movement from the GBP is likely due to anticipation over economic data coming from the US sometime soon. This is following Jerome Powell’s (chairman of the Fed) recent speech at a summit in the presence of important banking figures. His speech mainly concerned plans on interest rates in the US. He stated that inflation has been staying considerably higher than they had hoped for. Their target was 2%, whereas it is currently hovering around 3%. Therefore, they have been making more rate hikes this following month. This explains why the 100 GBP to USD is trading tightly around 126, with the dollar uncertainty remaining high.

GBP to USD: Key Metrics Influencing the Exchange Rate

Futures markets are anticipating interest rates to remain stable in September, with a 0.25% raise in October. However, this will likely be a temporary measure by their reckoning, and the Fed will cut down on rates going into the next year.

So the economic data coming soon will have a considerable impact on what the markets will expect from the Fed. There are expectations for consumer confidence data to have only a slight drop from 117 to 116 this month.

The effect on the best GBP to USD exchange rate will likely be from the House Price Index from the US and job numbers. Analysts believe we will see strong employment and housing market data regardless of inflation. However, the effect is likely to be quite small.

Analysts expect the best GBP to USD rate to drop down to roughly the level of 1.24.