The Pound US Dollar (GBP/USD) steadily fell over the course of last week. The US Dollar (USD) was initially boosted ahead of the US Federal Reserve’s interest rate, with the GBP/USD pair plummeting following the meeting as the Fed signalled a likely March interest rate hike.
What’s Been Happening: Fed Indicates Interest Rate Hike In March to Combat Inflation
The US Dollar started last week following a greater than forecast fall across all sectors, as soaring Covid-19 cases caused further supply chain disruptions and kept consumers away from shops and restaurants in January.
The safe-haven ‘Greenback’ benefitted from a largely risk-averse market mood throughout the week however as geopolitical tensions at the Ukraine-Russia border drove investors to the currency.
Following Wednesday’s meeting of the US Federal Reserve, USD soared as Chair Jerome Powell signalled a likely interest rate hike in March in order to combat record-high inflation. Powell also indicated a end to the central bank’s bond buying programme, and a tapering of their Covid stimulus package.
The Pound suffered throughout the week owing to the US Dollar’s strength, as well as ongoing domestic political woes. As ministers continue to await the publication of an internal inquiry into allegations of illegal gatherings at 10 Downing Street, confidence in PM Boris Johnson continues to waver.
Weekly highlights
- US Non Farm Payrolls
Employment forecasts for the coming week are expected to show a further squeeze on the US labour market.
2. BoE Interest Rate Decision
The Bank of England (BoE) is expected to announce an interest rate hike at its meeting on Thursday.
3. UK January PMIs
This week brings final readings for the UK’s January PMIs with a forecast fall across all sectors likely to hamper upward movement for the Pound.
GBP/USD Forecast
The pair’s movements are likely to be dictated this week by the BoE’s interest rate decision on Thursday, with the expected 0.5% rate hike likely to push GBP/USD upward.