The GBP/USD currency pair continues to shed value, falling below 1.3550. This decline comes amid rapidly growing demand for the US Dollar. With news for both sides arriving in rapid sequence, traders were left recalibrating their positions during the European trading session Friday. Like us, they were bracing for key U.S. consumer sentiment figures.
Market participants are focused on the preliminary Consumer Sentiment data from the University of Michigan. Consequently, the US Dollar is raging back to life. The next release of this data, scheduled for the end of month, should provide new data-driven clarity to the Federal Reserve’s policy path. Investors could hardly wait on this one.
At the same time, mixed UK economic figures have not been able to support the Pound Sterling. Indeed, the most recent figures have reported that the UK’s Gross Domestic Product (GDP) flatlined in July. This outcome matches up very closely with market expectations. As well, unexpectedly poor data on industrial output put further exerts pressure on the British currency.
On a wider sweep, inflation in the world’s largest economies have accelerated in August, but only slightly. This nascent but incipient trend underscores the growing chasm of inflation expectations between the US and foreign counterparts. Tariff costs are slowly starting to percolate into the American economy. Their impact on final consumer prices has been limited up to now.
GBP/USD’s price action is a continuation of the broader theme we’ve seen play out across major currency pairs. The EUR/USD was likely too weak, too far down. After running into strong resistance at the 1.1750 mark earlier in the session, it has crumbled back down toward the 1.1700 level. The Euro has been similarly challenged by the surging Dollar.
“Global inflation watch: Tariff pass-through still in progress” – FXStreet
Traders are hand-in-glove with economic indicators at the moment. In other words, they’re preparing themselves to monitor closely how the next consumer sentiment data might affect the US Dollar and global currency markets. Considering the importance of consumer sentiment, market participants are watching these developments closely. They are prepared to change course with their investments, should the monetary policy go in another direction.