The Pound to US Dollar (GBP/USD) exchange rate started Monday’s session steadily, with the pairing fluctuating around $1.31.
The ‘Greenback’ has become more subdued after President Donald Trump authorised blood plasma treatments to fight Covid-19. As a result, risk appetite received a boost on increased hopes of progress against coronavirus.
Last Week: GBP/USD Falls as Doubts over Post-Brexit Trade Deal Grow
The GBP/USD exchange rate fluctuated between highs of $1.32 and lows of $1.30 last week due to mixed signals over UK-EU post-Brexit trade negotiations.
While Downing Street appeared optimistic early in the week about securing a trade deal in September, Michel Barnier, the EU’s Chief Negotiator, said he was ‘disappointed’ and ‘concerned’ by the lack of progress in the latest round of Brexit talks. Meanwhile, David Frost, the UK’s Negotiator, added ‘little progress’ had been made towards a consensus.
On top of this, while Friday’s latest PMI August figures showed business activity grew at its fastest rate in seven years, it also raised concerns over the growing pace of job cuts in the UK.
Meanwhile, the US Dollar traded in a wide range last week on shifting market sentiment.
At the start of the week, upbeat market sentiment and concerns on the deadlock in Washington over the next round of US stimulus weighed on USD exchange rates.
However, the US Dollar recovered losses later in the week as market sentiment soured after the Federal Reserve’s policy meeting minutes warned of ‘elevated uncertainty’ over the US economy.
Additionally, broad weakness in the US Dollar’s rivals, as well as US economic data releases, pushed the ‘Greenback’ higher. However, US initial jobless claims rose above one million again which limited US Dollar gains slightly, offering the Pound to US Dollar exchange rate some support.
Three Things to Drive GBP/USD This Week
- Fed Powell Jackson Hole Speech
US Dollar (USD) investors will be looking ahead to the Federal Reserve’s annual Jackson Hole symposium, traditionally a major event used to clearly outline monetary policy. This could be a key driver of the Pound to US Dollar exchange rate this week as USD investors look for insight into the Fed’s forward guidance.
- Bank of England Speeches
This week will see two key speeches from the Bank of England (BoE), with Wednesday’s speech by Andrew Haldane, the Bank’s Chief Economist, and Friday’s BoE Governor Andrew Bailey speech. Any indication that negative interest rates are a possibility will likely drive volatility in the Pound
- Brexit Developments
Sterling traders will be keeping a close eye on UK-EU Brexit developments this week, with signs of a consensus on a possible post-Brexit trade deal boosting the GBP/USD exchange rate.
Pound to US Dollar Forecast
The Pound to US Dollar (GBP/USD) exchange rate will continue shifting with Brexit, market sentiment and coronavirus developments this week. As a result of a quiet week on the UK economic front, we could see Sterling fluctuate on announcements either from Downing Street or the EU on Brexit progress.
Meanwhile, US Dollar exchange rates could experience volatility after Powell’s speech at the Jackson Hole symposium. Additionally, significant economic data releases, domestic political uncertainty and US-China relations will also likely drive USD.