GBP/USD Weekly Summary: UK Inflation Rises at Fastest Pace in 40 Years

The Pound US Dollar (GBP/USD) exchange rate is climbing higher today amid increased bets on further rate hikes from the Bank of England (BoE). The currency pair remained volatile in the past seven days amid fresh UK inflation highs and US recession fears.

What’s Been Happening: Investors Pare Back BoE Rate Hike Bets, Goldman Sachs Warns of US Recession

The Pound (GBP) saw some drastic falls last week as worrying data releases heaped further pressure on the currency. Figures released on Wednesday showed UK inflation rising at its fastest pace in 40 years in May. The rate hit 9.1% and saw the currency slump as investors pared back their bets on future BoE rate hikes.

Weak PMI figures on Thursday prompted another drop in Sterling. Economists warned that the fall to UK private sector growth indicated that the country’s economy may be ‘running on empty’.

An unsteady market mood limited major gains for the US Dollar (USD) last week. USD also suffered amid warnings from Goldman Sachs that the US could be facing a recession in the next year.

Multiple speeches from Fed Chair Jerome Powell also likely added to these concerns last week. Whilst Powell signalled further rate hikes, he also conceded that such action could push the US economy closer to a recession.

Weekly highlights

  1. BoE & Fed Head Speeches

With speeches from Andrew Bailey and Jerome Powell due this week, will either provide insight into their respective institution’s future actions?

  1. PCE Price Index

Forecasts indicate that the Fed’s preferred measure of inflation is set to rise May. Will this push the Fed to act?

  1. UK Government Leadership Challenges

With reports that Conservative MPs are once again seeking to challenge Boris Johnson’s premiership, will this uncertainty weigh on the Pound?

GBP/USD Forecast

Signals from Fed Chair Powell of further rate hikes could pull USD lower if it increases concerns of an early US recession. The Pound (GBP) could also slip if Bailey remains cautious at his Wednesday speech.

Gareth Monk

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