The Pound US Dollar (GBP/USD) exchange rate fell last week. A risk-off market mood may have pushed GBP/USD lower, as well as Federal Reserve rate hike bets and UK Prime Minister Boris Johnson’s resignation.
What’s Been Happening: Bailey Adds to Poor UK Outlook, USD Soars amid Recession Fears
The Pound tumbled over the past seven days. The release of the Bank of England’s (BoE) financial stability report on Tuesday contributed to the UK economy’s already dreary outlook. BoE Governor Andrew Bailey stated that the global economic outlook had ‘deteriorated materially’.
Domestic political issues drove much of Sterling’s movements last week. Following a wave of resignations, PM Boris Johnson announced his resignation on Thursday.
GBP saw a mild boost as the announcement helped to quell some uncertainty in the markets. The Pound struggled to make any gains afterward however, with markets turning to the possibility of a protracted leadership contest.
The US Dollar benefitted from global recession fears last week. The risk-off mood saw the US Dollar Index hit a 20-year high.
Sustained bets on aggressive rate hikes from the Federal Reserve also helped to push USD higher. The release of the latest FOMC minutes confirmed the central bank’s plans.
Weekly highlights
- UK GDP Figures
The UK’s latest GDP figures are expected to report the UK growth stalled in May, likely denting the Pound amid growing fears over the UK’s economic trajectory.
- US Inflation
Another rise in US inflation could propel the US Dollar even higher this week, as another jump will likely reinforce Fed rate hike bets.
- US Retail Sales
The publication of the latest US retail sales figures are also likely to influence the US Dollar this week. Will a rebound in sales growth buoy the ‘Greenback’?
GBP/USD Forecast
The ongoing UK leadership contest could also infuse more volatility into the Pound US Dollar exchange rates this week. Speeches from multiple Fed policymakers prompt some falls in the currency pair if they reaffirm the central bank’s hawkish stance. On the other hand, a dip to US consumer sentiment could under GBP/USD.