The Pound US Dollar (GBP/USD) exchange rate seesawed last week, despite largely upbeat US employment releases.
What’s Been Happening: US Dollar Rises amid Robust Labour Data
The US Dollar (USD) began last week on strong footing, as US Treasury bond yields surged to a 16-year high. In tandem with a risk-off market mood, this catapulted the safe-haven ‘Greenback’ higher.
This continued through Tuesday, after September’s JOLTs job opening figures beat forecasts. This indicated strength in the US jobs market, sparking bets on further tightening from the Federal Reserve.
However, these gains were trimmed on Wednesday in response to weaker-than-expected ADP employment figures.
Bond yields then began to cool on Thursday, which served to coalesce with an uptick in initial jobless claims, capping USD.
Friday saw the release of the latest non farm payrolls data. This eclipsed forecasts, printing at 335,000 and indicated robust employment levels in the US, sparking further hike bets and triggering further volatility in USD.
Meanwhile, the Pound (GBP) floundered over the week. Data remained in short supply for most of the week’s session.
Wednesday saw GBP rates trend higher, following a better-than-forecast services PMI. The report showed that activity in September contracted less than preliminary readings suggested.
Bank of England (BoE) Deputy Governor Ben Broadbent suggested further rate hikes were ‘an open question’ on Thursday. Which, alongside a bullish market mood, buoyed the Pound at the end of the week.
Three Things to Watch Out for This Week
- UK GDP
August’s GDP reading is set to print on Thursday. Economists forecast a 0.2% expansion, which could boost GBP and quell recession anxieties amongst investors.
- US FOMC Minutes
The latest FOMC meeting minutes could bring fresh volatility to the US Dollar on Wednesday, if they suggest room for further tightening.
- US Inflation Data
Thursday brings the release of the latest US consumer price indexes. If both core and headline CPI cooled in September as forecast, the ‘Greenback’ may weaken against its peers.
Pound US Dollar Forecast
The GBP/USD exchange rate will face notable headwinds this week. The escalation of conflict between Hamas and Israel is likely to stoke demand for the safe-haven ‘Greenback’.