The Pound US Dollar (GBP/USD) exchange rate saw some volatile shifts last week. The currency pair climbed higher off the back of Bank of England (BoE) rate hike bets and shifts in risk appetite.
What’s Been Happening: BoE Bets Boost Sterling
The Pound (GBP) initially ticked higher at the beginning of last week after hawkish comments from BoE policymaker Michael Saunders and Governor Andrew Bailey.
These gains were likely limited by a mixed jobs report. Figures indicated that wage growth continued to lag behind inflation in May.
Wednesday saw UK inflation hit a fresh 40-year high on Wednesday. A drop to core inflation saw Sterling slip, however.
A contraction to June’s retail sales also weighed on the Pound on Friday. GBP’s losses may have been underpinned by slightly above-forecast PMIs, however.
The US Dollar (USD) saw an initial drop last week, as Federal Reserve policymakers sought to calm market expectations of a 1% rate hike.
Shifts to risk appetite also dictated movement for the safe-haven ‘Greenback’ last week. Fears of a Eurozone gas supply shortages saw the currency tick higher amid a risk-off mood.
Poor PMI figures saw USD fall on Friday. The US services sector saw a significant contraction in July amid soaring inflation.
Weekly highlights
- Fed Interest Rate Decision
With markets having largely priced in a 0.75% rate hike, will the Fed shock markets with a 1% hike?
- US GDP Growth
Will the forecast recovery to growth in the second quarter boost USD?
- UK Travel Sector Woes
With lengthy queues at Dover and further airline issues, will the economic impact of travel issues harm Sterling?
GBP/USD Forecast
UK Distributive trades on Tuesday could pull the Pound lower if they present a dreary outlook for the UK’s retail sector. Political uncertainty in the UK as well as Brexit-related woes could also present headwinds for GBP.
A drop to the US PCE price index, the Fed’s preferred method of inflation, could limit any gains for USD if figures print as forecast.