Pound US Dollar Weekly Forecast: GBP/USD Fluctuates amid Wavering Rate Hike Bets

The Pound US Dollar (GBP/USD) exchange rate traded in a wide range last week, as central bank rate rise bets remained in flux.

What’s Been Happening: GBP/USD Oscillates amid Shifting Rate Hike Bets

At the start of last week, risk appetite drove the pairing. The US Dollar (USD) weakened in bullish trade.

While US retail sales printed below forecasts, the market mood began to sour. Emerging anxieties over the US debt ceiling prompted the downbeat trade, counterintuitively lifting USD.

Furthermore, the Pound (GBP) weakened on Tuesday following an unexpected increase in unemployment. Wage growth also showed signs of cooling, which weighed on Bank of England (BoE) rate hike bets.

Midweek, upbeat trade saw the ‘Greenback’ lose ground against its peers. Sterling managed to gain ground amid cushioning comments from BoE Governor Andrew Bailey, who indicated room for further hikes.

On Thursday, US jobless claims fell more than forecast. With this indication of a tight labour market, the ‘Greenback’ climbed and was propelled further by hawkish Federal Reserve speeches.

However, Friday’s speech from Fed Chair Jerome Powell weighed on the US Dollar. He indicated that rates may not need to go much higher, denting Fed rate hike bets.

Meanwhile, a lack of impactful data kept Sterling muted as market dynamics ruled GBP’s direction.

Three Things to Watch Out for This Week

  1. UK Inflation

UK inflation data is due to print on Wednesday and is forecast to show a sharp cooldown. However, could sticky core inflation boost GBP?

  1. FOMC Minutes

The latest Federal Open Market Committee (FOMC) meeting minutes are due to be published Wednesday. If they are broadly hawkish, USD could rally.

  1. US Core PCE Data

As the Fed’s preferred inflation gauge, forecasts of a hold in the index could boost USD by pointing to further hikes.

GBP/USD Outlook

Elsewhere, both the US and UK are due to see the release of private sector PMI flashes tomorrow. With minor stumbles forecast for the UK’s indexes over May, the Pound could stumble.

John Mulcahey

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