The Pound US Dollar (GBP/USD) exchange rate climbed over the past seven days from record lows. The currency pair managed to recover some of its losses after the Bank of England (BoE) intervened to stabilise the UK bond market, however.
What’s Been Happening: Pound Recovers Ground after BoE Bond Market Intervention
The Pound (GBP) saw a drastic fall at the week’s opening as market confidence in Sterling faltered. This followed the reveal of the government’s proposed widespread tax cuts in the week prior.
GBP found some confidence on Wednesday after the BoE intervened to stabilise the UK bond market amid a mass sell-off. Better-than-expected GDP figures also helped to bolster the currency.
The US Dollar (USD) initially saw subdued gains last week amid a mixed market mood. A retreat in risk appetite helped USD rise as the week went on.
The US Dollar was muted on Thursday after second quarter GDP figures indicated a technical recession for the US economy.
Federal Reserve rate hike bets underpinned the currency throughout the week, however. A rise in the core PCE price index on Friday added fuel to these expectations.
Weekly highlights
- US ISM PMIs
A predicted slip in private sector performance for September could dent confidence in the US economy on Monday and Wednesday. If figures print as forecast, could it see reduced Fed rate hike bets amid signs of a weaker economy?
- US Employment Data
If unemployment remains at 3.7% and non farm payrolls slip, could indicators of a tight labour market boost the currency?
- UK Economic Policy
Despite a drastic U-turn from the UK government this morning bolstering the Pound, markets remain wary over PM Liz Truss’ approach to the economy. Will comments from Truss and Chancellor Kwasi Kwarteng prompt movement in Sterling?
GBP/USD Forecast
The final printing of the UK’s services PMI on Wednesday could weigh on GBP if it slips as forecast. For the US Dollar, speeches from Fed policymakers could push USD higher.