The Pound US Dollar (GBP/USD) exchange rate climbed throughout last week despite a volatile risk attitude. Tensions at the Ukraine-Russia border continued to weigh upon the currency pair. The rate continued to be bolstered by expectations of an upcoming interest rate hike from the Bank of England (BoE).
What’s Been Happening: UK Inflation at Highest since March 1992 amid Mixed Fed Outlook
The Pound remained propped up throughout last week by expectations of an interest rate hike from the BoE. UK inflation figures hit 5.5% on Wednesday which likely increased speculation of the rate hike.
Wage growth figures on Tuesday likely limited Sterling’s gains over the course of the week however. Real wage growth fell 0.1% year-on-year in December behind the current pace of inflation.
The US Dollar (USD) meanwhile struggled to make significant ground last week. The safe-haven ‘Greenback’ saw risk sentiment shift quickly amid the developing situation on the ground in Ukraine. This meant that any significant gains for USD were limited.
Speculation regarding a March rate hike from the US Federal Reserve may have helped underpin losses for USD however, although dovish FOMC minutes on Wednesday may have limited any significant bets.
Weekly highlights
- US GDP Growth Estimates (Q4)
Should figures print as forecast, then positive estimates for US GDP growth could help boost USD.
2. BoE Speeches
A number of BoE policymakers, including Governor Andrew Bailey are scheduled to speak this week. Will some hawkish comments help to bolster the Pound?
3. Geopolitical Tensions
The currency pair will likely be affected by further developments at the Ukraine-Russia border. NATO member leaders have stated that they are still seeking a diplomatic solution to the crisis, although US officials have reiterated that view that Russia is preparing for imminent military action.
GBP/USD Forecast
February PMIs for the US are forecast to rise in both sectors which could help USD climb on Tuesday. A predicted downturn in February’s consumer confidence may harm the US Dollar however.