The Pound US Dollar (GBP/USD) exchange rate began last week on a downward slope amid a pessimistic outlook for the UK economy.
A recovery in global risk appetite helped GBP/USD to recover some of its losses later in the week. Further hawkish signals from the Federal Reserve may have limited major gains for the pairing however.
What’s Been Happening: Johnson Faces Resignation Calls, US Employment Figures Remain Strong
The Pound continued to drop last week. A lack of significant data and multiple bank holidays saw Sterling at the whim of UK’s poor forward outlook.
A drop in UK manufacturing growth also likely weighed on GBP throughout last week as growth in the sector hit a 16-month low in May.
Mounting pressure on PM Boris Johnson over the course of the week may have also pulled Sterling lower. Criticism of the PM after the report into the ‘Partygate’ continued to grow.
The US Dollar (USD) meanwhile struggled at the beginning of last week amid risk-on trading. The news that Shanghai would be easing its Covid-19 lockdowns helped restore global confidence.
Wednesday saw a return of risk-off trading however which helped to bolster USD. An above-forecast ISM manufacturing PMI also buoyed USD demand in the middle of the week.
A rebound in risk appetite then weakened the US Dollar again on Thursday, before a stronger-than-expected US payroll print then erased some of these losses at the end of the week.
Weekly highlights
- Boris Johnson No-Confidence Vote
Boris Johnson faces a no-confidence vote later Today. Assuming he survives the vote the Pound is likely to strengthen.
- US Inflation
The latest US CPI release will be a key focus for USD investors this week. Another dip in inflation could impact Fed rate hike bets and weaken the US Dollar.
- US Consumer Sentiment
Also set to influence the US Dollar will be the University of Michigan’s latest US consumer sentiment index. Will another drop in morale weaken USD exchange rates?
GBP/USD Forecast
A vote to remove UK PM Johnson could inject some volatility into the Pound this week, especially if he unexpectedly losses the vote.