At the time of writing GBP/USD was trading at $1.2762, down approximately 0.2% from Thursday’s opening rate.

The US Dollar (USD) recouped some of its recent losses on Thursday despite the latest American PPI missing forecasts.

The US PPI report unexpectedly fell by 0.2% in May on a monthly basis, missing forecasts of a 0.1% increase, after April’s 0.5% rise. Following Wednesday’s cooler-than-forecast inflation report, the data indicates that price pressures in the US are gradually easing, and moving closer to the Federal Reserve’s 2% target rate.

Ken Tjonasam, Portfolio Strategist at Global X, said that the data shows a sustained easing in pricing pressures as inflation gradually eases in the superpower economy: ‘The softer PPI figures, coupled with other recent inflation data, start to throw cold water on the Fed’s overtly cautious comments from yesterday’s FOMC meeting. These shifts suggest a more favourable path ahead, potentially accelerating discussions around easing monetary policy. In short, the data is clear: We’re on a more favourable path, with potential rate cuts becoming more likely as inflation continues to cool.’

Meanwhile, an unexpected rise in the latest US initial jobless claims further stymied the US Dollar’s upside potential, with the number of newly unemployed American citizens jumping by 13,000 to reach a total of 242,000 in the week ending 8 June. This notably surpassed market expectations of a decline to 225,000, indicating signs of easing in the US labour market.

However, the ‘greenback’ ultimately managed to rise higher against some of its major rivals, somewhat recovering from its mid-week slump.

Pound (GBP) Buoyed by Deferred BoE Rate Cut Bets

The Pound (GBP) was mostly subdued on Thursday amid a lack of fresh UK releases.

With notable data in short supply, reduced Bank of England (BoE) interest rate cut bets served to keep Sterling afloat.

A majority of economists and investors alike now stand largely in agreement that the central bank will most likely wait until September to enact its first interest rate cut, with markets pricing in only one rate reduction for the remainder of 2024.

Yael Selfin, Chief UK economist at KPMG, said: ‘While we are seeing some tentative signs of cooling in the labour market, service sector inflation remains persistently high and it is likely the MPC would want to wait until the next set of forecasts and a few more data points before it embarks on its first rate cut.’

Analysts have also pointed out that only one set of employment data and two batches of inflation figures are due out before the central bank’s August monetary policy meeting, which will likely leave the BoE reluctant to deliver any hasty monetary loosening until later in the year. In turn, GBP may manage to keep its head above water as the week draws to a close.

Pound US Dollar Exchange Rate Forecast: US Trade Data in Focus

Looking ahead, the latest US trade data is due for release on Friday. Exports are due to have flatlined in May, retreating from a 0.5% increase in April. In addition to this, imports are due have to slowed significantly in May, rising by just 0.1%, in comparison to the previous month’s 0.9% increase. Should the data print in alignment with market projections, signs of decreased input and output may call the US economy’s resilience into question, thereby denting the ‘greenback.

Looking to the UK, a data-light end to the week could see GBP left vulnerable to global market dynamics, with any upbeat trade likely to lift the increasingly risk-sensitive Pound against its safe-haven rivals.