The Pound US Dollar (GBP/USD) exchange rate struck a new one-month low last week as the pairing was undermined by US debt ceiling concerns.
What’s Been Happening: US Debt Concerns Support Safe Haven US Dollar
The GBP/USD exchange rate stumbled through the first half of last week amid growing concern over the state of US debt ceiling talks. Fears of the potential global ramifications of a US default led investors to favour the safe-haven US Dollar (USD).
The Pound (GBP) then fluctuated on Tuesday. Disappointing UK PMIs being offset after the International Monetary Fund (IMF) upgraded its 2023 UK growth forecast.
GBP/USD then fluctuated wildly in mid-week trade with the release of the UK’s consumer price index. Hotter-than-expected inflation in April prompted GBP investors to reprice their expectations for further Bank of England (BoE) interest rate hikes.
Meanwhile, dovish FOMC minutes and reports of a potential debt ceiling deal started to temper USD demand in the second half of the week.
The Pound then attempted to recover on Friday on the back of stronger-than-expected UK retail sales figures. However this was quickly reversed after a surprise uptick in the core PCE price index stoked Federal Reserve rate hike bets.
Three Things to Watch Out for This Week
- US Non Farm Payrolls
Centre stage this week will be the latest US payroll figures. If the US economy continued to add more jobs than expected in May, this may bolster Fed rate hike bets and lift the US Dollar.
- US ISM Manufacturing PMI
Ahead of the payroll figures, USD exchange rates may see some movement on the back of the latest ISM manufacturing PMI. Will another contraction in the US factory sector apply some pressure to the US Dollar?
- UK Manufacturing PMI
The UK’s own manufacturing PMI will be the only UK data of note this week. Could an upwards revision to May’s finalised figures help to support Sterling sentiment?
Pound US Dollar Outlook
It’s likely BoE and Fed rate hike speculation will act as a key catalyst of movement in the Pound US Dollar exchange rate this week. Will this infuse further volatility into GBP/USD?