The Pound US Dollar (GBP/USD) exchange rate strengthened last week, amidst speculation the Federal Reserve could pause its tightening cycle in September.
Last Week: Pound US Dollar Climbs amid Narrowing Fed Policy Divergence
The US Dollar weakened last week. USD exchange rates being undermined by suggestions the Fed might pause its interest rate hikes later in the year.
This was supported by a drop in the core PCE price index. Which alongside a weaker-than-expected US GDP reading sapped USD demand in the latter half of the week.
Meanwhile the Pound faced a major setback at the start of last week. The GBP/USD exchange rate shed a large portion of its initial gains in the wake of the UK’s latest PMI releases.
GBP investors were particularly spooked by an alarming drop in service sector growth, with the plunge stoking recession fears.
However, Sterling was quick to bounce back. The announcement of Chancellor Rishi Sunak’s £15bn cost of living support package helped to ease recession concerns, while also bolstering hopes the Bank of England (BoE) will continue to raise interest rates.
Three Things to Watch out for This Week
- US Payrolls
The primary focus for USD investors this week will be the publication of the latest US payroll release. Will another robust expansion in US employment growth help to buoy the US Dollar?
- US PMIs
Also likely to influence USD exchange rates are the publication of this month’s ISM PMIs. A slowing of US private sector activity could dent the ‘Greenback’.
- Market Risk Appetite
In the absence of any notable data and with UK markets closed for much of the week due to the extended Jubilee weekend, movement in the Pound is likely to be driven by external factors. Could a bullish market mood help to prop up Sterling?
Pound US Dollar Outlook
Expect to see movement in the Pound US Dollar exchange rate dominated by US data this week amidst a slew of high impact releases.