A sense of optimism helped to buoy the Pound to US Dollar exchange rate over 1% this morning as markets prepare for a further easing of national lockdown conditions.
Last Week: Disappointing US Payrolls Shore up Pound US Dollar Exchange Rate
As the finalised UK services PMI for April proved better than anticipated this helped to give the Pound a leg up against its rivals last week.
With the UK economy continuing to demonstrate signs of having recovered momentum at the start of the second quarter GBP exchange rates were able to push higher across the board.
The mood towards the US Dollar, meanwhile, weakened in the wake of the latest set of US labour market data.
While forecasts had pointed towards a sharp 978,000 monthly increase in April’s non-farm payrolls figure it instead showed growth of just 266,000, suggesting that the labour market lost significant momentum last month.
Three Things to Watch out for This Week
1. UK Gross Domestic Product
Demand for the Pound could weaken on Wednesday with the release of the first quarter UK gross domestic product report.
With the quarterly growth rate expected to show a contraction of -1.6% confidence in the underlying strength of the economy could take a blow, leaving the GBP/USD exchange rate vulnerable to selling pressure.
2. US Inflation Rate
Support for the US Dollar may pick up on the back of April’s US inflation rate, with inflationary pressure expected to show a significant uptick on the year.
Even so, with the Federal Reserve clear in its intention to keep interest rates on hold even in the face of rising inflation the ultimate impact of the figure could still prove limited.
3. US Retail Sales
With US retail sales forecast to show a loss of momentum in the wake of March’s 9.8% surge the US Dollar could face some additional pressure.
However, so long as consumers continue to spend this could limit any negative impact from the data, helping to shore up USD exchange rates in the short term.
GBP/USD Outlook
A quarterly growth contraction could see the Pound to US Dollar exchange rate shedding ground this week, ceding back some of its recent bullish gains.