GBP/USD Exchange Rate Slips as UK Economic Data Fails to Impress

The Pound to US Dollar exchange rate slipped from a three-week high last week, in the wake of some underwhelming UK economic data.

What’s Been Happening: Pound Sinks on Underwhelming Data

The Pound slumped last week, as investors were left disappointed by the latest UK economic releases

This was mostly driven by publication of the UK’s latest monthly GDP release, which revealed economic growth rose less than expected in May, alarming GBP investors as it suggested the UK’s road to recovery may not be as smooth as some had hoped.

While Sterling mounted a comeback on the back of a surprise acceleration in UK inflation on Wednesday, the Pound was unable to sustain these gains in light of some mixed employment figures.

The US Dollar, meanwhile, struggled to fully capitalize on the Pound’s weakness at the start of last week’s session as demand for the safe-haven currency was dented by hopes for a coronavirus vaccine.

However, with US-China tensions flaring again in the latter half of the week, the ‘Greenback’ was still able to close the week up against the Pound.

Three Things to Watch Out for This Week

1. UK PMI Figures

Top of the agenda for GBP investors this week is likely to be the UK’s latest PMI release. July’s preliminary figures are expected to show the private sector finally returned to growth this month, potentially helping to boost the Pound.

2. Brexit

Also likely to influence Sterling sentiment will be Brexit. Will the UK and EU be able to reach a breakthrough this week, or will the continued lack of progress towards a trade deal weigh on GBP exchange rates

3. US Fiscal Stimulus

In the US, talk of a second coronavirus stimulus package is likely to be a key impetus for the US Dollar this week, with the White House under pressure to agree on new measures before the current package expires at the end of July.

GBP/USD Forecast

It’s likely we will see the GBP/USD exchange rate trade in a wide range this week, as coronavirus developments and the UK PMIs likely infuse the pairing with fresh volatility.

Matthew Andrews

Contact Matthew Andrews


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