The Pound to US Dollar (GBP/USD) exchange rate traded in a wide range last week, largely in response to an impasse in Washington.
What’s Been Happening: US Dollar Undermined by Failure to Pass Stimulus Package
The US Dollar was initially buoyant last week, bolstered by concerns over renewed US-China trade tensions.
However, the ‘Greenback’ struggled to consolidate these gains as improving market sentiment through the week dampened demand for the safe-haven currency.
USD exchange rates then suffered a final setback at the end of the session as the US Senate adjourned for a month-long summer recess, having failed to pass a new coronavirus stimulus package.
The Pound also experienced volatility last week in light of some gloomy UK economic releases.
This was mostly centred on the UK’s latest GDP estimate, which revealed the UK economy contracted a record 20.4% in the second quarter, plunging the country into its first recession in 11 years.
Subsequent comments from Chancellor Rishi Sunak, warning of ‘hard times’ and of a significant rise in unemployment, then drove additional volatility in Sterling.
Three Things to Watch Out for This Week
1. UK PMIs
Acting as the main catalyst in the Pound this week looks to be the UK’s latest PMI figures. Will another solid bump in business activity help to buoy Sterling, or will worrying employment figures limit any upside in GBP against USD?
2. FOMC Minutes
For USD investors the focus this week looks to be on the minutes from the Federal Reserve’s latest policy meeting as they look for more insight into the bank’s plans for the remainder of 2020.
3. US Election Concerns
Also potentially influencing US Dollar exchange rates this week will be concerns over the upcoming US election amidst claims Donald Trump is sabotaging the election by undermining the US postal service.
The Pound to US Dollar exchange rate may face additional volatility this week, in response to some notable UK data releases and rising political uncertainty in the US.