GBP/USD Weekly Summary: Exchange Rate Rebounds from Two-Year Low

The Pound US Dollar (GBP/USD) exchange rate traded in a wide range last week following the latest interest rate decisions from the Federal Reserve and Bank of England (BoE).

What’s Been Happening: BoE Signals Forceful Action, Fed Undertakes Largest Rate Hike since 1994

The Pound (GBP) slumped through the start of last week, as worse-than-expected GDP figures pulled Sterling lower. The UK’s economy contracted by a surprise -0.3% in April.

Mixed unemployment figures on Tuesday also weighed on the Pound. An above-forecast rise to unemployment saw traders pare back their bets on any aggressive action from the BoE.

The Bank of England’s (BoE) interest rate decision on Thursday helped GBP/USD to recover some of its losses however, as the central bank issued more hawkish forward guidance than expected.

The US Dollar (USD) saw gains close to the beginning of last week, underpinned by global recession fears and a repricing of Fed rate hike expectations.

The US central bank’s interest rate decision on Thursday saw the US Dollar fall however. Whilst the Fed raised rates by 0.75%, its forward guidance was less hawkish than expected.

However USD exchange rates then bounced back again at the end of the week after Fed Chair Jerome Powell stated the US central bank is ‘acutely focused’ on bringing inflation back to its 2% goal.

Weekly highlights

  1. Fed Chair Jerome Powell Testimonies

Powell is likely to be grilled by Congress on what he is doing to combat inflation. Will the US dollar rally if he reiterates the bank’s commitment to keeping inflation under control?

  1. UK Inflation Figures

With inflation set to climb even higher, will the figures pull Sterling lower on growth concerns?

  1. US PMIs

With output across all private sectors forecast to fall, with the worrying outlook harm the US Dollar?

GBP/USD Forecast

Further tensions between the UK and the EU over the Northern Ireland Protocol could continue to weigh on the currency pair. On the other hand, strong risk appetite could help to bolster the exchange rate.

Gareth Monk

Contact Gareth Monk


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