The Pound US Dollar (GBP/USD) exchange rate climbed over the past week, as risk-on trade and poor US data kept the ‘Greenback’ down.
What’s Been Happening: USD Stifled amid Risk-On Trade
The US Dollar (USD) began the week on the defensive, as risk appetite remained elevated from the previous week. This carried through the early week, nullifying an uptick in US consumer confidence in March.
In contrast, the Pound (GBP) saw strength. Alongside bullish trade, the distributive trades data from the Confederation of British Industry (CBI) sparked optimism.
Geopolitical tensions brought safe-haven flows to USD midweek. Sino-American tensions simmered as the Taiwanese President Tsai Ing-Wen visited the US. Rate hike increases were also pointed to by Federal Reserve official Michael Barr.
Recession anxieties in the UK muted GBP in midweek trade. However, Friday’s shock 0.1% climb in Q4 GDP data sent Sterling upward.
The ‘Greenback’ was initially dented by a cooldown in the core PCE price index, but remained elevated. As such, economists saw room for at least another hike in May, lending modest tailwinds.
Three Things to Watch Out for This Week
- US Non Farm Payrolls
On Friday, the US’ latest non farm payrolls data is due to print. A fall is forecast in March, which could weigh on the ‘Greenback’.
- BoE Financial Summary and Record
Due on Tuesday, the Bank of England are due to publish their financial policy summary and record. If this provides further reassurance for investors, GBP could rally.
- US ISM PMIs
Both manufacturing and service sector indexes are due to print this week. Will services remaining in growth support USD?
GBP/USD Outlook
Over the week’s trade, market sentiment is likely to play a role in shaping the pairing. With a bevy of data pertaining the US economy, if it provides a positive outlook it may spark upbeat trade. As such, this could boost GBP over the ‘Greenback’.