GBP/USD Weekly Forecast: Pound US Dollar Exchange Rate Loses Footing Thanks to Profit Taking

A bout of profit taking left the Pound to US Dollar exchange rate on the back foot in the wake of the Easter bank holiday, in spite of optimism over the upcoming easing in UK lockdown conditions.

Last Week: Improved Fourth Quarter UK GDP Bolsters GBP/USD Exchange Rate

As the finalised fourth quarter UK gross domestic product saw a surprise upward revision this helped to boost the Pound against its rivals.

With confidence in the underlying health of the UK economy improved GBP exchange rates pushed higher across the board over the course of the week.

Although March’s US non-farm payrolls showed a much sharper increase than anticipated on Friday this was not enough to put much of a dampener on the GBP/USD exchange rate.

While the US labour market showed fresh evidence of stabilising the US Dollar struggled to capitalise on the improvement, given the limited trading volumes over the bank holiday weekend.

Three Things to Watch out for This Week

1. UK Services PMI

March’s finalised services PMI could prompt some additional volatility for the Pound this week, with markets wary of the potential for any downward revision.

As long as the service sector shows a strong rebound on the month, however, this could help to push the GBP/USD exchange rate higher once again.

2. US Balance of Trade

With forecasts pointing towards a widening of the US trade deficit for February the mood towards the US Dollar could sour on Wednesday.

Fresh evidence of deteriorating trade conditions could see USD exchange rates stumble, especially as concerns over the health of the global economic outlook linger.

3. Federal Open Market Committee Meeting Minutes

Greater US Dollar weakness could be in store in the wake of the release of the Federal Reserve’s most recent set of meeting minutes, meanwhile.

If policymakers express a greater sense of dovishness, further diminishing the chances of any monetary policy tightening in the coming year, the appeal of the US Dollar could weaken further.

GBP/USD Exchange Rate Outlook

Fresh cause for confidence in the recovery of the UK economy may well help the Pound to US Dollar exchange rate recover its lost ground over the coming days.

Louisa Heath

Contact Louisa Heath