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GBP cannot resist a decline. Overview for 25.05.2023

25 may 2023 - Fx4News

The British pound sterling had fallen further against the US dollar by Wednesday. The current GBPUSD quote is 1.2340.

After the UK released rather weak inflation statistics for April, investors stepped up the sale of the pound sterling. Yes, the CPI was below the 10% y/y threshold for the first time in eight months, and this is not bad. However, underlying prices continued to gain momentum and rose at the fastest rate in more than thirty years. Components of prices in the service sector also showed growth. Taken together, all this could lead to the Bank of England stepping up its fight against inflation by way of raising interest rates. However, the Bank of England's conservative stance could be a stumbling block – the regulator almost never follows market expectations.

Pressure on the pound exchange rate is also intensifying as the US dollar strengthens its position on the global foreign exchange market. Investors are sticking to safe-haven assets because the White House and the US Congress cannot agree on a government debt limit. 

A strong US dollar is unlikely to let the pound stabilise now. This will happen when the tension around the US government debt issue is resolved.

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