The Pound US Dollar (GBP/USD) exchange rate fell last week, as the UK’s economic outlook continued to worsen.
What’s Been Happening: Pound Slides as UK Economic Outlook Deteriorates
The Pound (GBP) began last week on unsure footing, owing to a short supply of impactful data.
This prompted vulnerability in Sterling on Tuesday, as the focus began to shift to the impact of soaring borrowing costs.
Dismal readings from the latest UK private sector indexes sent Sterling sliding on Wednesday. Both the manufacturing and service sectors were found to have contracted in August, sparking recession concerns.
This weakness was further compounded by worrying distributive trades data. The Confederation of British Industry (CBI) found that retail sales slumped at the fastest pace in two years in August. This sparked fresh concerns over the key sector’s health.
Meanwhile, the US Dollar (USD) strengthened last week amid hawkish comments from Federal Reserve officials.
On Tuesday, Richmond Fed President Thomas Barkin said the bank needed to remain open to the possibility of economic acceleration.
While downbeat PMI data weighed on the ‘Greenback’ in midweek trade, a surprise fall in initial jobless claims boosted USD.
Hawkish comments from Fed Chairman Jerome Powell at the Jackson Hole Symposium brought further support to end the week.
Three Things to Watch Out for This Week:
- UK BoE Pill Speech
On Thursday, Bank of England (BoE) Chief Economist Huw Pill is due to speak. If he delivers hawkish remarks, GBP could strengthen.
- US Core PCE Price Index
The Fed’s preferred inflation gauge is set to print on Thursday, with economists anticipating an uptick. Could signs of sticky core inflation propel USD higher?
- US Non-Farm Payrolls
Late this week, August’s US non-farm payrolls data is due to print. A fall in the number of jobs created is expected, which may dent USD.
GBP/USD Outlook
This afternoon, the JOLTs job openings data for July is scheduled for print and may indicate signs of cooling in the labour market. If this prints in line with forecasts, USD could fall against its peers.