The Pound US Dollar (GBP/USD) exchange rate fluctuated last week, as mixed economic data afflicted Sterling.
What’s Been Happening: Pound Seesaws amid Mixed Economic Data
At the start of the week, the Pound (GBP) firmed as investors bet on further hikes from the Bank of England (BoE).
However GBP exchange rates subsequently fell on gloomy economic forecasts, which suggested the UK was to face five-years of lost growth. Furthermore, analysts believed there to be a 60% chance of a recession in 2024.
Friday saw Sterling reverse the gloom, as second quarter GDP data printed above forecast. Showing an expansion of 0.2% on a quarterly basis, the resilience further sparked renewed BoE rate hike bets.
Meanwhile, the US Dollar (USD) was initially undermined by perceptions that the Federal Reserve could pause their current tightening cycle.
Safe-haven flows served to underpin the ‘Greenback’ before dovish remarks from Fed officials reiterated their data driven stance.
USD then sank ahead of the latest US consumer price index. Before quickly rebounding after July’s CPI figures reported the first acceleration in headline inflation in a year.
On Friday, the latest US PPI data printed above forecasts. This buoyed USD as it affirmed Fed hike bets, but gains were capped by deteriorating consumer confidence.
Three Things to Watch Out for This Week:
- UK Inflation
Both headline inflation and core inflation are forecast to cool, which may weaken Sterling when the data prints on Wednesday.
- UK Wage Growth Data
Tomorrow brings the release of the UK’s latest wage growth data. Will a new record rise in wages bolster BoE rate hike bets and boost the Pound?
- US FOMC Minutes
Scheduled for publication on Wednesday, the latest FOMC minutes could boost USD if they signal there is appetite for further tightening.
GBP/USD Outlook
GBP/USD could see support tomorrow, when the latest unemployment figures print alongside the wage growth data. With the jobless rate forecast to hold at 4%, this may indicate a tight labour market and give room for further BoE hikes, strengthening GBP.