The Pound US Dollar (GBP/USD) exchange rate climbed higher over the past week. The announcement of household support plans by UK PM Liz Truss may have bolstered the currency pair. Sustained bets on further interest rate hikes from the Federal Reserve may have capped gains for the pair, however.
What’s Been Happening: Pound Bolstered amid Appointment of New PM and Action on Energy Prices
The Pound (GBP) saw gains initially last week after the appointment of Liz Truss as the new UK PM. Markets reacted positively to the prospect of political stability in the country.
The announcement of energy price support plans for UK households and businesses helped bolster the Pound later in the week.
The US Dollar (USD) meanwhile soared to near two-decade highs last week amid risk-off flows.
Additionally, hawkish comments from Fed policymakers, including Chair Jerome Powell, kept Fed rate hike bets sustained and pushed USD higher.
The safe-haven ‘Greenback’ saw a slip at week’s end however amid a return of risk appetite.
Weekly highlights
- UK Employment Figures
If unemployment remains close to record-lows, then it could increase bets on BoE rate hikes and push the Pound higher. An uptick in wage growth could have a similar effect if investors view it as a sign of wage driven inflation.
- US Inflation Data
A slip in US inflation could see investors pare back their bets on aggressive interest rate hikes from the Federal Reserve. A fall in producer prices on Wednesday could also see USD fall.
- UK Inflation
A forecast uptick in inflation could have a mixed effect on Sterling. The figures could help bolster rate hike bets and help GBP make gains. On the other hand, the effect of soaring prices on UK households could harm the Pound.
GBP/USD Forecast
The Pound could struggle if Friday’s retail sales figures slip as forecast. Additionally, the currency could see subdued bets amid a period of national mourning following Queen Elizabeth II’s death.
US retail sales figures on Thursday are set to fare better however, remaining unchanged in August. A forecast rise in consumer sentiment on Friday could also help USD to climb.