The Pound US Dollar (GBP/USD) exchange rate traded within a narrow range at the beginning of last week. Contrasting stances from the Bank of England (BoE) and Federal Reserve limited major movement for the currency pair.
GBP/USD fell sharply at week’s end however after below-forecast retail sales and confidence figures for the Pound (GBP). Additionally, a dovish speech from BoE Governor Andrew Bailey may have helped push Sterling lower.
What’s Been Happening: Powell Signals 0.5% Hike from the Fed as Bailey Warns of Possible Recession
Bank of England officials were largely dovish in speeches last week which continued to weigh on the Pound (GBP). Governor Andrew Bailey maintained his softened language around future rate hikes.
On Friday, Bailey stated that the central bank was walking a ‘very tight line’ between curbing inflation and potentially sparking a recession.
GBP slumped on Friday however following worse-than-expected retail data for March, as well as a drop to consumer confidence for April.
The US Dollar (USD) meanwhile was largely supported an aggressive stance on rate hikes from the Federal Reserve. Multiple policymakers gave speeches throughout the week supporting a more aggressive rate hike.
Of most interest however was Chair Jerome Powell’s speech on Thursday. In it, Powell signaled that a 0.5% rate hike would be ‘on the table’ for the Fed’s May meeting.
Weekly highlights
- US GDP Figures
Advance figures for the first quarter of 2022 are expected to fall sharply. Could this pull the buoyant US Dollar lower?
- PCE Price Index
The Fed’s preferred measure of inflation is forecast to rise even higher in March. Will this see further speculative bets on USD over rate hike expectations?
- UK Domestic Politics
UK PM Boris Johnson is continuing to face pressure over the ‘partygate’ scandal. Will calls for his resignation push the Pound lower?
GBP/USD Forecast
The Pound US Dollar (GBP/USD) exchange rate could climb off the back of a weakened US Dollar if GDP figures print as forecast. Gains for the pair could be limited should the BoE continue its cautious rhetoric, however.