The Pound US Dollar (GBP/USD) exchange rate traded in a wide range last week, amidst a mix of UK economic concerns and speculation the Bank of England (BoE) could hike interest rates in the near-term.
What’s Been Happening: Pound Finds Brief Respite on BoE Rate Hike Speculation
The Pound spent the majority of last week on the back foot, as it continued to be undermined by concerns over the UK’s economic resilience.
At the start of the week this was driven by a sharp rise in energy prices and warnings of potential food shortages due to the knock-on impact on CO2 production, whilst the end of the week saw Sterling sentiment sapped by petrol shortages due to panic buying.
However the Pound was able to find some substanical, but fleeting support on Thursday on the back of the BoE’s latest interest rate decision, as some hawkish forward guidance saw investors begin to price in a potential March 2022 rate hike.
Meanwhile, the US Dollar rallied through most of last week in response to a prevailing risk-off mood, as well as the Federal Reserve’s latest policy meeting, following which it dropped its strong hints yet that it will soon begin tapering its bond purchases.
Three Things to Watch Out for This Week
- US Durable Goods Figures
Potentially driving movement at the start of this week will be the publication of the latest US durable goods order figures. WIll a rebound in order growth help to bolster the US Dollar?
- ISM Manufacturing PMI
Also influencing USD exchange rates this week will be the latest ISM manufcaturing PMI, with the ‘Greenback’ likely to find support if activity in the US factory sector remained robust this month.
- UK Economic Woes
For GBP investors, the focus is likely to remain on the current hurdles facing the UK’s economic recovery, with the potential for prolonged petrol shortages to cause further disruption.
Pound US Dollar Forecast
The Pound US Dollar exchange rate remains vulnerable to losses this week as UK economic concerns continue to mount, while a gloomy mood may help to reinforce demand for the ‘Greenback’.