The Pound US Dollar (GBP/USD) exchange rate remained volatile last week, with the pairing being infused with notable volatility in the wake of the UK’s latest inflation figures and Chancellor Rishi Sunak’s Spring Statement.
What’s Been Happening: Fed Prepares Markets for Aggressive Rate Hikes
The Pound (GBP) struggled against many of its rivals last week. A dovish outlook from the Bank of England (BoE) following their interest rate decision the week prior continued to place pressure on Sterling.
Data published on Wednesday reported UK inflation hit a 30-year high in February. Alongside Chancellor Rishi Sunak’s Spring Budget this gave rise to fresh concerns over the UK’s cost-of-living crisis.
The US Dollar remained buoyed last week amid hawkish rhetoric from multiple Federal Reserve officials. Fed Chair Jerome Powell signalled that the Fed would be willing to employ more ‘aggressive rate hikes’ should they be necessary.
The safe-haven ‘Greenback’ also continued to draw support off the back of the war in Ukraine. Fresh reports of Ukrainian counterattacks kept hopes for peace talks subdued.
Weekly highlights
- Ukraine-Russia Conflict
Further escalations in the conflict are likely to determine risk appetite in the coming week, with the US Dollar likely to strengthen if investors remain broadly risk-off.
2. US Employment Data
Also influencing the US Dollar will be the release of the latest US payroll print. Will another robust reading help to bolster the ‘Greenback’?
3. UK Cost-of-Living Concerns
With Rishi Sunak set to face tough questions in UK parliament, concerns over the UK’s cost-of-living crisis are likely to remain front and centre, limiting the Pound’s upside potential.
GBP/USD Forecast
A speech from BoE Governor Andrew Bailey could see GBP dip lower should he reiterate the central bank’s dovish policy outlook. A rise to GDP growth on Thursday could help the Pound recover potential losses however.
For the US Dollar, speeches from Fed officials throughout the week could help boost the currency should the Fed’s stance remain hawkish.