GBPUSD Market takes caution with the dollar’s strength. The GBP/USD pair is facing a difficult situation as the US dollar begins again to strengthen, reaching its recent peak level since April. This is largely due to the recent surge in US long-term inflation anticipations, which reached a 12-year peak in May. Analysts believe this could be the start of a prolonged period of increasing prices, which could result in the Fed maintaining higher interest rates for a longer period. The possibility of a slump has added to the resilience of the greenback, as investors view it as a safe-haven currency.
Fed Interest Rate Notice
The University of Michigan’s preliminary May report showed that consumers are anticipating an annual inflation rate of 3.2% over the next five to 10 years. This is the highest level since 2011 and indicates that prices could be on the rise shortly. Additionally, traders’ sentiment dropped to a six-month low in May due to the stalemate over the federal government’s borrowing limit.
These factors have combined to push the value of the US dollar up against the GBPUSD pair, making it more expensive for British traders to purchase US dollars. This could harm British exports and imports, as it will become more expensive to purchase goods from overseas.
The current situation is likely to remain in place until the US inflation rate begins to slow down or the US government can raise the borrowing limit. Until then, traders and consumers should be prepared for the GBP/USD pair to remain weak against the US dollar. The Eurozone is expected to avoid a slump when its first quarter GDP report is released on Tuesday. According to investors, the growth rate is likely to remain unchanged at 0.11% and 1.33% on a quarterly and yearly basis, respectively.
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