The Pound US Dollar (GBP/USD) trended higher last week. The exchange rate spiked on Wednesday after US inflation printed below expectations. Friday’s UK GDP figures saw the currency pair shed some of its gains, however.
What’s Been Happening: Pound Gains Tempered GDP Downturn Pushes UK Closer to Recession
The Pound struggled over the course of last week after the Bank of England’s (BoE) gloomy forecasts in the week prior.
Ahead of significant GDP figures, a slump to retail sales figures on Tuesday increased fears of a slowdown in the sector.
The GDP figures on Friday likely pulled Sterling even lower. The data indicated that the UK economy contracted in June with a drastic slump to growth.
The US Dollar, meanwhile, saw a sharp fall on Wednesday after July’s inflation figures printed below forecast. Inflation in July slipped to 8.5% versus forecasts of 8.7%.
On the other hand, hawkish comments from Federal Reserve officials at week’s end may have helped to limit losses for the US Dollar.
- UK Employment Data
UK unemployment is forecast to remain at 3.8% in June. However, the accompanying earnings figures are expected to report a slowing of wage growth, which could drag on Sterling.
- UK Inflation Figures
UK inflation is expected to have accelerated again in July. While the figures could exacerbate cost of living concerns, it could also reflect positively on the Pound if it bolsters BoE rate hike bets.
- US FOMC Minutes
Following hawkish comments from Fed officials last week, will the FOMC minutes help to bolster this stance and push the currency higher?
A drop to UK retail sales could further dampen confidence in the Pound if figures print as forecast on Friday. Political uncertainty in the country may also continue to weigh on the currency.
A slowdown in US retail sales growth on Wednesday may also see the US Dollar drop. Any additional comments from Fed policymakers could also cause movement in the currency.