The Pound US Dollar (GBP/USD) exchange rate struggled to find a clear direction through the week as a myriad of mixed data for both the US and UK weighed heavy. Prolonged industrial action kept a firm lid on the Pound.
What’s Been Happening: GBP/USD Undermined by Dire UK Economic Outlook
The Pound opened the week on the backfoot as economists expect the UK to endure the longest and worse recession in the G7. Elsewhere, the International Monetary Fund (IMF) gave a stark warning that a third of the world’s economies will enter a recession in 2023.
Industrial action throughout the week kept a firm lid on Sterling as rail strikes intensified, further impacting the economy.
The end of the week saw the service sector PMI revised lower, keeping it in contraction territory. Meanwhile, house prices fell for the fourth consecutive month, highlighting the weakening housing market.
Meanwhile, the US Dollar started the week strongly amidst a risk-averse market mood. Further bolstering the ‘Greenback’ was strong employment data. JOLTs job openings reported stronger job creation, pointing to a resilient labour market.
The release of the Federal Open Market Committee (FOMC) minutes provided little surprise to investors as the Federal Reserve maintained their hawkish stance. However, warnings of a slowing pace of hikes sapped some demand.
End of the week and further positive labour market data lifted the US Dollar. The unemployment rate fell to 3.5%, far below expectations, and non-farm payrolls also ticked higher than expected.
However, a wavering market mood and the first contraction in the services sector since the height of the pandemic saw the ‘Greenback’ slip.
Three Things to Watch Out for This Week
- US Inflation
An expected further softening of inflation could temper rate hike bets, sapping demand.
- UK GDP
A predicted weakening economy could pull Sterling lower
- UK Industrial Action
Relentless strikes amid a cost-of-living crisis will keep
Pound US Dollar Forecast
Elsewhere, the ever-wavering global market sentiment could cause further movement for the pairing. Investors will be keeping a close eye on the Covid situation in China.