The Pound to US Dollar (GBP/USD) exchange rate has edged higher since markets opened this morning, though way below levels seen at the start of last week as this week’s European trading begins.
The US Dollar could regain traction later on as a lack of economic data from the UK could limit Sterling’s appeal throughout the day.
Last Week: Disappointing UK Economic Data Causes Pound to Stumble
The Pound had been supported against the US Dollar at the start of last week as better-than-expected employment change figures and a rise in inflation mid-week from the UK helped to bolster the currency.
However a hawkish outlook from the Federal Reserve paired with concerns over the UK’s reopening from coronavirus caused the Pound to stumble.
The US Dollar strengthened towards the end of last week as the Federal Reserve laid out plans to hikes interest rates sooner-than-expected in 2023, a move that caused markets to become jittery and the ‘Greenback’ to soar.
The GBP/USD pairing ended the week trending lower as disappointing retail sales figures from the UK did little to support Sterling.
Three Things to Watch for This Week
- BoE Interest Rate Decision
Towards the end of the week the latest interest rate decision from the Bank of England (BoE) could add some much needed support to the Pound. Whilst interest rates are not expected to change from lows of 0.1%, a more hawkish stance from the bank would bolster the Pound.
- Flash Markit PMI’s
The release of both the UK and US’s flash Markit PMI data could give both currencies support if they continued to should a sustained growth in their respective sectors. Though the Markit PMI’s are not as influential in the US as the ISM PMI’s the figures will give a clear indication into how the US economy is performing.
- Coronavirus Developments
Pound investors will continue to keep an eye on any further coronavirus developments in the coming days, as cases continue to rise in the UK investors will look to see if there is any indication the UK’s economic recovery will be less than plain sailing.
A quieter economic week for the GBP/USD pairing could see movement driven more by the global market mood and coronavirus developments for much of the week. However, the BoE’s interest rate decision could cause fresh impetus for Sterling.