The Pound US Dollar (GBP/USD) exchange rate strengthened last week, as mixed data releases kept Federal Reserve rate hike bets in flux.
What’s Been Happening: USD Wavers amid Mixed Labour Data Releases
Over the past week, the US Dollar (USD) wavered as mixed jobs data and an initially upbeat market mood sapped sentiment.
Early in the week, the JOLTs jobs openings data slumped further than forecast in February. This began a common thread over the week, with signs of a slowdown appearing in the US jobs market. With this prompting a pullback in rate hike bets, USD began to struggle for support.
However, the latest non-farm payrolls data and unemployment rate brought some tailwinds. The fall in unemployment and addition of 236,000 jobs pointed to signs of tightness in the US labour market. As such, the door was opened for another interest rate hike in May.
Meanwhile, the Pound (GBP) saw a sparse data calendar. As a result, the lack of drivers left GBP to trade predominantly on market sentiment.
Initially, GBP investors began to bet on a further 25bps hike from the Bank of England (BoE), bringing some support. However, Sterling trimmed its gains later in the week amid muted trade around the Easter bank holiday weekend.
Three Things to Watch Out for This Week
- US Inflation
On Wednesday, US headline CPI is forecast to cool. This could lead to pared back Fed rate hike bets, weakening USD.
- FOMC Minutes
Late Wednesday sees the publication of the latest Federal Open Market Committee (FOMC) minutes. A dovish outlook could dent the ‘Greenback’.
- BoE Speeches
Throughout the week, policymakers from the BoE are scheduled to speak. If they take a hawkish stance to inflation, rate hike bets could lift GBP.
GBP/USD Outlook
Another key release for the Pound this week is the UK’s latest GDP reading. If the UK economy expanded in February, as forecasters expect, it could raise hopes that the country will manage to avoid a recession after all. This could see Sterling climb.