Pound US Dollar Exchange Rate Weekly Forecast: GBP/USD Falls to 37-Year Low

The Pound US Dollar (GBP/USD) exchange rate slumped over the past week after above-forecast US inflation figures cemented Federal Reserve rate hike bets. A drastic slump in UK retail sales figures also weighed on the pair, bringing GBP/USD to a 37-year low.

What’s Been Happening: Pound Turbulent amid Disappointing Retail Data

The Pound initially saw gains last week. The currency found support from a boost to Bank of England (BoE) rate hike bets following better-than-expected UK employment and inflation data.

A surprise slump in August’s retail sales saw the currency tumble at week’s end, however. Sales fell by 1.6% versus a forecast drop of 0.5%. The drop also added to fears that the country may already be in a recession.

After US inflation figures surprised to the upside on Tuesday, the US Dollar (USD) maintained an upward momentum throughout last week. The data release bolstered Fed rate hike bets which also pushed USD higher.

Upbeat retail sales figures also helped push USD higher on Wednesday. August’s sales rose by 0.3% instead remaining unchanged as expected. A retreat in global risk appetite also prompted gains for the ‘Greenback’.

Weekly highlights

  1. Fed Interest Rate Decision

Wednesday’s decision from the Fed is likely to see USD climb even higher, with some economists predicting an above-forecast 1% interest rate hike. Will a more aggressive-than-forecast rate hike boost the US Dollar?

  1. BoE Interest Rate Decision

The BoE is expected to hike rates by 0.5% on Thursday with more hawkish bets on a 0.75% hike. Could a 0.75% hike help GBP recover lost ground?

  1. UK PMIs

September’s PMIs for the UK’s services sector on Friday could worsen the UK’s outlook. Soaring energy costs are expected to limit output for the country’s dominant sector. Will the figures pull the Pound lower?

GBP/USD Forecast

The Pound could see some renewed optimism this week ss the UK economy returns to normal activity after the country’s period of mourning.

PMIs for the US private sector on Friday could curb USD’s gains if they slip as forecast.

Gareth Monk

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