GBP/USD Exchange Rate Falls as Dollar Hits 11-Month High Against Pound

The Pound US Dollar (GBP/USD) exchange rate remained rocky throughout last week, as it dropped significantly on Friday after having climbed the rest of the week. The fall was largely due to increased risk-averse trading in the safe-haven US Dollar as bond yields rose.

Pound and US Dollar Recap: Dollar soars as Investor Eye early Fed Rate Hike

The Pound (GBP) saw a strong start to the week, as it was initially boosted by strong jobs figures as unemployment fell to 4.3%.

Sterling was further boosted by Wednesday’s inflation data, which saw the an above forecast rise of 4.2% to a ten year high, with the two positive releases bolstering expectations for the Bank of England (BoE) to hike interest rates next month.

The US Dollar traded cautiously toward the beginning of the week despite positive retail sales on Tuesday, an investors initially flocked to riskier currencies.

USD saw a spike on Friday however, as expectations of an early interest rate hike by the Federal Reserve and rising bond yields prompted risk-averse trading in the currency.

Top Three Highlights for This Week

  1. UK PMIs

The publication of the UK’s latest PMI figures are likely to act as a key catalyst for the pound this week. Will a slowing of growth in the private sector weigh on the GBP/USD exchange rate.

2. FOMC Minutes

In the spotlight for USD investors this week will be the minutes from the Federal Reserve’s latest policy meeting, as they seek to gauge whether there is any appetite for an early rate hike.

3. US Durable Goods Orders

Also driving movement US Dollar will be the latest US durable goods order release, with an acceleration of order growth last month potentially buoying the ‘greenback’.

GBP/USD Forecast

In addition to the data releases listed above, the GBP/USD exchange rate may also be influenced by headlines pertaining to Brexit as well as President Joe Biden’s   ‘Build Back Better’ stimulus plan.

Gareth Monk

Contact Gareth Monk