The Pound US Dollar (GBP/USD) exchange rate climbed over the past week, as shifting rate hike bets weighed on USD.
What’s Been Happening: USD Fluctuates on Changing Rate Hike Bets
Over the past week, the US Dollar (USD) traded in a wide range amid impactful data and shifting Federal Reserve rate hike bets.
At the beginning of the week, sharp declines in US Treasury bond yields kept USD on the backfoot. Tuesday saw some recovery, as US banking sector anxieties resurfaced which prompted safe-haven flows to the ‘Greenback’.
This turmoil led to pared back rate hike bets, which counteracted a surprise leap in durable goods orders. Furthermore, the latest GDP data printed at 1.1%. While still in growth territory, Thursday’s release likely further undermined rate hike bets.
Friday’s core PCE data initially helped USD climb, but analysis of the cooldown in the Fed’s preferred inflationary gauge remained downbeat. Leading the ‘Greenback’ to quickly reverse these gains.
Meanwhile for the Pound (GBP), a week bereft of data lead the currency to be drive by Bank of England (BoE) rate hike speculation. Initially, data from the Confederation of British Industry (CBI) indicated easing inflationary pressures.
However, the CBI noted midweek that retail sales had improved above forecasts, bring cheer to Sterling. Ultimately though, bets on continued tightening elevated Sterling above the ‘Greenback’.
Three Things to Watch Out for This Week
- Fed Interest Rate Decision
On Wednesday, the Fed will publish their latest interest rate decision. A 25bps hike is priced in, but hawkish forward guidance could strengthen USD.
- US Non Farm Payrolls
The latest non farm payrolls data is due to print on Friday. Will a sharp cooldown in created jobs weaken USD?
- Risk Appetite
Due to a lack of data releases for the Pound, an upbeat market mood could play on its increasingly risk-sensitive side and bring tailwinds.
GBP/USD Outlook
Later today, JOLTs job opening figures are scheduled to release. A decrease in openings is forecast, which may weigh on the US Dollar by pointing to signs of a cooling labour market.