The pound is soaring against the US dollars as sterling is set to have its longest winning streak in 2023.
The GBP/USD exchange rate has been appreciating throughout this week but spiked significantly yesterday (June 1).
This is likely due to investors slashing their bets for another June interest rate hike from the Federal Reserve, the US’ central bank.
Currently, the Pound/US Dollar exchange rate is hovering around $1.25269 and is set to have a sixth day of gains.
On Thursday morning, the pound fluctuated after hitting and retreating from a one-week high overnight.
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Overall, the GBP exchange rate remains underpinned as experts believe the Bank of England will continue to raise interest rates in a bid to control inflation.
Last week, the UK’s Consumer Price Index (CPI) forecast bested expectations with core inflation hitting a 31-year high.
In response to this, markets have been pricing in the likelihood of four more rate hikes from the Bank of England in the near future.
Some believe it is likely the central bank will consider a sizable 0.5 percentage point hike later this month.
As it stands, the Bank of England has raised the base rate of 4.50 percent, which is the rate at which other banks and lenders are charged when they borrow money.
These predictions continued to underpin the Pound yesterday which kept it close to its one-week high against the US Dollar.
Despite this, sterling appears to have been overbought which caused some mild volatility and mild losses.
As well as this, the UK’s final manufacturing PMI found a deep contraction in activity which triggered concern among investors.
At the time same this week, the US Dollar was successful in regaining some losses after apparently entering oversold conditions on Wednesday (May 31) night.
Investors appeared relieved this week at the confirmation of a compromise deal to raise the US debt ceiling which passed the vote in the House of Representatives.
Negotiations came close to the June 5 deadline which could have resulted in default on the US Government’s payments and a recession.
However, the deal has provoked the ire of policymakers across the aisle with a minority of Democrats and Republicans coming out against it.
As a result, the USD weakened in response to the market mood on Wednesday night but many of these losses were recovered the following day.
As it stands, the US economy is set to have added 190,000 jobs in May which is a drop from the month before and the unemployment rate is also likely to rise.
Investors will be looking closely at this data to see how American businesses are coping with the constant interest rate rises.
