Pound US Dollar Exchange Rate Weekly Forecast: GBP/USD Fluctuates on Disappointing UK Data

The Pound US Dollar (GBP/USD) exchange rate traded erratically last week, in response to mixed data and market risk-aversion.

What’s Been Happening: GBP/USD Mixed on Weak UK Data

The Pound (GBP) initially strengthened against the US Dollar (USD) last week, with the pairing rising in response to hawkish comments from Bank of England (BoE) Chief Economist Huw Pill.

Sterling’s fortunes began to sour on Tuesday as UK data pointed to a slowdown in the UK labour market. At the same time, the US Dollar drew strength from a stronger-than-expected US retail sales print.

Midweek the GBP/USD exchange rate began to creep higher again as the Pound was supported by hotter-than-expected UK inflation, while Federal Reserve interest rate expectations were undermined by dovish remarks from several Fed officials.

GBP/USD was then meet by resistance on Thursday, with the pairing dropping to a two-week low as growing geopolitical tensions saw investors favour the safe-haven US Dollar.

The end of the week saw USD exchange rates weaken in tandem with US Treasury yields, which helped relieve pressure on the Pound following disappointing UK retail sales data.

Three Things to Watch Out for This Week

  1. US GDP

The publication of the latest US GDP figures may act as a key catalyst of movement for the US Dollar this week. Will a sharp acceleration of growth in the third quarter bolster the ‘Greenback’?

  1. US Durable Goods

Also in focus for USD investors this week will be the latest core PCE price index. Could a fall in the Fed’s preferred indicator for inflation further undermine rate hike bets and pull USD lower?

  1. UK PMIs

Driving movement in the Pound will be the publication of the UK’s latest PMIs. October’s preliminary data is expected to show private sector activity continues to contract. Potentially dragging Sterling lower.

Pound US Dollar Forecast

In addition to some high-impact data releases, the GBP/USD exchange rate is likely to remain sensitive to market sentiment this week. If geopolitical tensions continue to grow demand for the safe-haven US Dollar is likely to strengthen.

Matthew Andrews

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