The Pound US Dollar (GBP/USD) exchange rate remained volatile last week. The currency pair rose at the beginning of last week amid supposed breakthroughs in peace talks between Ukraine and Russia. Ongoing military action kept investors aimed at the safe-haven ‘Greenback’ however.
What’s Been Happening: Bailey Warns UK Outlook Set to Worsen
Sterling continued to largely struggle last week amid a continued dovish outlook from the Bank of England (BoE). On Monday, BoE Governor Andrew Bailey warned that the UK’s cost of living crisis was likely to slow growth and demand.
A retreat to risk appetite also kept the Pound (GBP) supressed last week despite an uptick to GDP growth in the fourth quarter of 2021.
The US Dollar (USD) meanwhile saw renewed trading in the midst of this risk-averse market mood. Ukrainian forces continued to stage counterattacks against Russian forces throughout the week.
USD also saw a boost from strong employment data last week. Non-farm payrolls figures for March fell a little short of forecasts, whilst the unemployment rate ticked downward to 3.6%. A further tightening of the labour market increased Federal Reserve rate hikes bets and buoyed demand for the US Dollar.
Weekly highlights
- FOMC Minutes and Fed Speeches
The release of minutes from the Fed’s March policy meeting could strengthen the US Dollar assuming they reinforce the bank’s hawkish outlook. Additionally, several speeches from Fed officials this week could further bolster the currency should they echo this sentiment.
- War in Ukraine
The conflict is likely to continue to drive risk appetite in the markets. Reports today that Russian forces executed civilians before fleeing the town Bucha could undermine peace efforts between the two sides.
- US Balance of Trade
The US trade deficit is forecast to narrow slightly this week. Could the figures help prop up the US Dollar?
GBP/USD Forecast
A forecast rise to the UK’s service sector performance for March could help boost the beleaguered Pound on Tuesday.
Tuesday will also bring March PMIs for the US services sector which are expected to show a mild recovery. This could in turn help to push USD higher.