GBP/USD exchange rate strikes 31-month high in September
The pound dollar exchange rate was largely subdued in the 1.31 mid-range at the start of the month, despite upbeat UK PMI data showing the index for the powerhouse services sector came in higher than expected in August.
The pair edged lower towards the 1.31 benchmark on 6 September, despite the hotly anticipated nonfarm payrolls report showing the US economy added fewer jobs than expected in August. Investors ramped up Federal Reserve interest rate cut bets in the wake of the lacklustre print. However, cautious trade cushioned the safe-haven US dollar’s losses and weighed on the increasingly risk-sensitive currency.
The pound slumped to a three-week low versus the dollar on 9 September amid risk-off sentiment that dented the UK currency. Meanwhile, the dollar recouped some of its losses thanks to gloomy trading conditions.
The pound dollar rate touched a fresh three-week low on 11 September, a fraction above the 1.30 benchmark, despite the publication of cooler-than-forecast US inflation data for August. The US consumer price index (CPI) dropped to its lowest level since February 2021, printing at 2.5%, falling further than the 2.7% forecast and easing from the previous month’s reading of 2.9%.
However, this was overshadowed by GDP figures showing the UK economy unexpectedly stalled in July, missing expectations of a 0.2% expansion and easing from 0.2% growth in June.
The pound began to firm against the dollar on 16 September, advancing to a 10-day high above 1.32 amid an increase in Fed interest rate cut bets following a slew of underwhelming US data.
The pound extended its gains on 17 September, climbing to a 20-day high in anticipation of upcoming UK inflation data.
As expected, the inflation figures for August dampened Bank of England (BoE) rate cut bets the following day, helping the pound dollar rate to reach the 1.32 mid-range – a 30-month high. UK headline inflation held at 2.2% while underlying inflation accelerated from 3.3% to 3.6%.
The pound extended its bull run on 19 September after the dollar tumbled in the wake of the Fed’s jumbo 50 basis point the previous day – its first since 2020.
The pound dollar rate struck a two-and-a-half-year high above 1.33 on 20 September following the release of UK retail sales data confirming a larger-than-expected rise in consumer spending in August.
The pair touched a 31-month high above the 1.34 resistance level on 24 September following cautious remarks from Fed officials that increased bets on further rate cuts from the central bank this year.
The pound retreated from its multi-month high against the dollar the next day amid a souring market mood.
Following a few days of relative calm, the pound dollar rate firmed on 30 September despite an underwhelming UK GDP print, with Fed interest rate cut bets boosting the currency pair.
The pound dollar exchange rate ended the month around 1.337.
GBPUSD: 3-Month Chart
Looking ahead
The BoE’s Monetary Policy Committee is taking a breather this month. Its next interest rate announcement is scheduled for 7 November.
Influential data from the UK economy in October: ILO Unemployment Rate (15 October), Consumer Price Index (16 October), S&P Global/CIPS Composite (24 October), Retail Sales (25 October).
Like their British counterparts, the Fed’s next interest rate announcement will be made on 7 November.
Influential data from the US economy in October: ISM Manufacturing PMI (1 October), ADP Employment Change (2 October), ISM Services PMI (3 October), Nonfarm Payrolls (4 October), Consumer Price Index (10 October), Producer Price Index ex Food and Energy (11 October), Retail Sales (17 October), S&P Global Composite PMI (23 October), GDP (30 October), Core Personal Consumption Expenditures – Price Index (31 October).