The Pound US Dollar (GBP/USD) exchange rate spiked last week, amid signs of sticky UK core inflation.
What’s Been Happening: Pound Seesaws amid Core Inflation Hold
The Pound (GBP) seesawed at the beginning of last week, briefly dropping to a six-week low against the US Dollar (USD).
Record-high wage growth brought substantial support Sterling’s way on Tuesday, however. The data stoked Bank of England (BoE) interest rate hike bets, but a shock increase in unemployment capped these gains.
July’s consumer price index data extended the Pound’s gains, despite a sharp cooldown in headline inflation. Core CPI unexpectedly held at 6.9%, further boosting BoE hike bets, which led GBP/USD to climb just shy of a two-week high on Thursday.
On Friday, July’s retail sales data showed a dismal slump of 1.2%, pushing GBP lower and trimming its weekly gains.
Meanwhile, the US Dollar was unable to capitalise on strong domestic retail data, as it cheered investor sentiment and weighed on the safe-haven currency. However, the FOMC meeting minutes provided strength, as investors bet on a further rate hike from the Federal Reserve.
Varying risk appetite kept USD in flux to the end of the week, with Friday bringing safe-haven flows amid a souring mood.
Three Things to Watch Out for This Week:
- Jackson Hole Symposium
The symposium, one of the oldest economic policy events, begins on Thursday. Hawkish sentiments from Fed speakers, such as Powell, could boost USD.
- UK PMI Flashes
Wednesday brings the release of the latest UK private sector readings, with both sectors forecast to have slowed in August. If accurate, Sterling may weaken.
- US PMI Flashes
Due to print on Wednesday, the latest S&P US indexes are forecast to firm, which may bring cheer to USD investors.
GBP/USD Outlook
During the week, the Confederation of British Industry (CBI) are set to publish two data sets for the UK. Firstly, the industrial trends orders release is forecast to fall to -7. Similarly, the distributive trades data is anticipated to fall to -32. The release could fuel UK economic gloom and weaken the Pound.