Pound US Dollar Exchange Rate Rocked by Fluctuating Market Sentiment

The Pound US Dollar exchange rate traded in a wide range last week, in response to fluctuating market risk appetite.

What’s Been Happening: US Dollar Trades Erratically amidst Mixed Market Sentiment 

The US Dollar initially opened last week’s session on strong footing, attracting support amidst a bearish market mood and a pick-up in US Treasury yields. 

These gains were then reinforced by some hawkish comments from the Federal Reserve’s James Bullard. 

However, the US Dollar failed to sustained these gains through the latter half of the week, as a notable improvement in market risk appetite, sapped demand for the safe-haven currency. 

The Pound, meanwhile, weakened through the first half of the session, in response to renewed Brexit tensions and concerns over the government’s plans to raise national insurance contributions

Sterling sentiment then began to improve in mid-week trade, in the wake of comments from Bank of England (BoE) Governor Andrew Bailey, as he suggested the ‘minimum conditions’ have been met for the BoE to start raising interest rates. 

But the Pound was unable to close the week at its best levels, after the UK’s latest GDP figures revealed the economy all but stalled in July

Three Things to Watch Out for This Week 

  1. US CPI Release 

A key focus this week will be the latest US consumer price index. It’s release on Tuesday could see the US Dollar weaken as economists forecast inflation will have slowed last month, after peaking in July. 

  1. UK CPI Release 

In contrast, the publication of the UK’s own CPI figures could help bolster the Pound this week as domestic inflation is expected to have shot higher in August. 

  1. UK Jobs Report 

Also likely to influence Sterling sentiment this week will be UK’s latest jobs report. Will a fall in unemployment at the start of the third quarter reflect positively on GBP exchange rates? 

Pound US Dollar Forecast 

In addition to a wealth of economic data, movement in the Pound US Dollar exchange rate is also likely to continue to be driven by market sentiment this week, with the pairing potentially facing some resistance if the mood sours.