Pound US Dollar Exchange Rate Weekly Forecast: GBP/USD Whipsaws amid Signs of US Labour Market Slowdown

The Pound US Dollar (GBP/USD) exchange rate seesawed last week, amid signs of a slowdown in the US labour market.

What’s Been Happening: US Dollar Rocked by Poor Jobs Data

The US Dollar (USD) began the week on the defensive, following a shock fall in JOLTs job openings in July. A third consecutive fall in job openings began to fuel suspicions of a cooling US labour market.

On Wednesday, a fall in the latest ADP employment figures compounded these fears. The signs of slowdown prompted USD investors to pare bets on further tightening from the Federal Reserve.

However, an uptick in the core PCE price index reversed this weakness. The ‘Greenback’ began to climb on Thursday as investors bet on further tightening from the Fed, further boosted by a drop in jobless claims.

On Friday, the unemployment rate shocked investors with a surprise increase, and non farm payrolls remained modest, leaving USD weakened. However, the US Dollar then staged a startling recovery on the back of a stronger-than-forecast ISM manufacturing PMI.

Meanwhile, the Pound (GBP) began the week quietly as markets were closed for the bank holiday. Over the week, a lack of impactful data kept Sterling vulnerable to mounting recession fears.

On Thursday, Bank of England (BoE) Chief Economist Huw Pill delivered a vague speech which failed to inspire GBP investors. This left GBP listless through to the end of the week.

Three Things to Watch Out for This Week:

  1. BRC Retail Sales Monitor

Overnight, the British Retail Consortium (BRC) are due to release their sales data for August. Economists anticipate a 2.2% increase, which could boost GBP.

  1. US Services PMI

Wednesday brings the publication of the latest ISM services PMI for August. Could a slowdown in service sector activity weigh on USD?

  1. Fed Speeches

Throughout the week, various Fed officials are due to deliver speeches. If they strike a consistent hawkish tone, USD may rally.

GBP/USD Outlook

Elsewhere, risk appetite is likely to prove a key driver of movement for GBP/USD. Owing to Sterling’s increasingly risk-sensitive nature, a shift to bullish trade could strengthen GBP exchange rates.

John Mulcahey

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