A decline in February’s UK mortgage approvals data was not enough to keep the Pound to US Dollar exchange rate from pushing higher at the start of the week.
Last Week: UK Inflation Miss Limited Pound US Dollar Exchange Rate Upside
As the UK inflation rate failed to pick up as forecast in February, instead dipping from 0.7% to 0.4% on the year, this left the Pound on a weaker footing.
Although the March services PMI showed a much stronger performance than anticipated this was not enough to give the GBP/USD exchange rate any boost.
However, as the latest US durable goods orders figure saw a sharp contraction on the month, pointing towards weaker consumer confidence, the US Dollar started to fall out of favour.
The widening of February’s advance goods trade deficit also weighed on the US Dollar on Friday, with deteriorating trade conditions looking set to weigh on US economic growth in the first quarter.
Three Things to Watch out for This Week
1. UK Gross Domestic Product
While no change is forecast for the finalised fourth quarter gross domestic the report could still prompt some fresh volatility for GBP exchange rates.
Any indication of a sharper slowdown in economic momentum during the final three months of 2020 could see the Pound come under pressure.
2. US ISM Manufacturing PMI
Confidence in the underlying health of the US economy looks set to improve on the back of Thursday’s ISM manufacturing PMI.
As long as the manufacturing sector delivers another solid month of growth in March this is likely to limit the downside potential of USD exchange rates.
3. US Non-Farm Payrolls
The mood towards the US Dollar could improve dramatically on Friday if March’s non-farm payrolls figure increases as sharply as anticipated.
A solid uptick in employment could see USD exchange rates pushing higher across the board, with a stronger labour market likely to offset other causes for concern within the US economy.
GBP/USD Exchange Rate Outlook
With forecasts pointing towards an improved ISM manufacturing PMI and stronger non-farm payrolls report the Pound to US Dollar exchange rate appears vulnerable to selling pressure this week.