The Pound US Dollar (GBP/USD) exchange rate was changeable last week. The pair climbed initially following robust UK employment figures, before falling after UK inflation hit a 40-year high. A surprise jump in UK retail sales helped to boost the pair at week’s end.
Major gains for GBP/USD were likely limited by a hawkish stance from the Federal Reserve. Multiple Fed policymakers continued to reinforce the central bank’s aggressive rate hike schedule.
What’s Been Happening: UK Inflation Hits 40-Year High, Powell Strengthens Hawkish Fed Stance
The Pound (GBP) saw a strong boost on Tuesday after UK unemployment fell to its lowest point since 1974. The robust figures came alongside a 7% increase to wages (including bonuses), although average earnings failed to rise alongside inflation.
On Wednesday, UK inflation hit a 40-year high which saw Sterling take a tumble. The figures prompted consternation among analysts and increased fears of a looming recession.
However, an unexpected jump in UK retail sales boosted the Pound on Friday. UK sales rose by 1.4% in April, rather than shrinking 0.2%, as was expected.
The US Dollar (USD) struggled throughout much of last week amid a return of risk appetite in the markets. A climb in April’s retail sales helped the currency to regain some lost ground on Tuesday.
Hawkish comments from Fed Chair Jerome Powell may have helped prevent major losses for USD last week. Powell stated that the central bank would ‘not hesitate’ to raise rates further if necessary.
Weekly highlights
- UK & US PMIs
Will both countries see a further hit to private sector growth as forecast?
- FOMC Minutes
USD investors will be looking at the Fed meeting minutes to gauge just how hawkish the central bank might be.
- Northern Ireland Protocol Tensions
As a US delegation travels to the UK amid souring UK-EU relations, will both sides commit to productive negotiations?
GBP/USD Forecast
Hawkish minutes from the FOMC could pull the GBP/USD pair lower this week. Additionally, a fall in private sector growth could worsen the UK’s already-pessimistic forward outlook and knock the pair even lower.