The Pound US Dollar exchange rate has fluctuated so far this week, with UK recovery optimism supporting Sterling while USD exchange rates have moved in line with rising and now retreating US Treasury yields.
Last Week: US Developments Lead to Plunge in GBP/USD
The US Dollar continued clawing back ground against the Pound last week as President Biden’s huge US fiscal stimulus plan finally passed through US Congress, as well as some stronger-than-expected US Non-Farm Payrolls data.
With the US outlook improving, the US Dollar has been mounting a surging rebound from its recent lows.
The Pound’s own rally has been running out of steam as much optimism around the UK’s pandemic recovery hopes appear to have been priced into Sterling already, leaving GBP/USD to trend lower throughout last week.
Three Things to Watch Out for This Week
- US Inflation Rate
February’s inflation rate figures from the US on Wednesday could offer support to USD exchange rates. Inflation is expected to have increased to 1.7% last month, which could drive US Treasury yields up and in turn the US Dollar.
- UK GDP
Friday will see the publication of a slew of key UK economic data, including trade balance, production and the GDP growth rate from January. Stronger-than-expected data could boost optimism about the UK’s economic performance and keep Sterling buoyed.
- US Michigan Confidence Data
US confidence data from Michigan University will be published on Friday. If US confidence shows more signs of improving, the US Dollar may have an easier time sustaining its recent rebound.
GBP/USD Outlook
The Pound US Dollar exchange rate will continue to be driven UK recovery optimism and fluctuating US Treasury yields this week.
At the same time, a rising US inflation rate and confirmation of a -4.9% contraction of UK GDP in January could weigh on the GBP/USD exchange rate.