Pound US Dollar Weekly Forecast: GBP/USD Slides as UK Economy Deteriorates

The Pound US Dollar (GBP/USD) exchange rate slumped last week, as UK private sector data indicated economic weakness.

What’s Been Happening: Pound Slips as PMIs Disappoint

The Pound (GBP) began last week in a narrow range, owing to a lull in data releases.

Sterling began to slide on Tuesday following October’s flash PMIs. Both the manufacturing and services sectors saw further contractions, which sparked recession concerns. Additionally, the latest unemployment data indicated an uptick in joblessness.

Downbeat retail sales data from the Confederation of British Industry (CBI) brought more woes on Thursday. However, Friday saw GBP trade without a clear direction again due to a light data calendar.

Meanwhile, the US Dollar (USD) began the week on a sour note. US Treasury yields continued to rise, prompting speculation that the Federal Reserve may not need to raise interest rates further.

The ‘Greenback’ was able to reverse these losses, climbing on the back of strong PMI data. Both manufacturing and service sector data beat forecasts, indicating economic resilience.

While GDP data also smashed forecasts, it did little for USD exchange rates as it lifted the market mood. This dampened the safe-haven currency, before Friday’s cooldown in the core PCE price index weakened it further.

Three Things to Watch Out for This Week

  • BoE Interest Rate Decision

The Bank of England (BoE) is expected to keep interest rates unchanged on Thursday, which may weaken Sterling. However, if it offers hawkish forward guidance, GBP could rise.

  • Fed Interest Rate Decision

Similarly, the Fed is expected to hold rates again on Wednesday. If the door is left open to further rate hikes, USD could strengthen.

  • US Labour Data

A raft of American jobs data is due out over the course of the week. Chiefly, the non-farm payrolls figure on Friday is forecast to have fallen, which may indicate slack in the jobs market, weakening USD.

Pound US Dollar Forecast

The GBP/USD exchange rate could see further volatility later in the week, following the publication of October’s ISM manufacturing index. Economists anticipate the reading to stay at 49, which may undermine USD by pointing to ongoing weakness in the sector.

John Mulcahey

Contact John Mulcahey

Do Not Sell My Personal Information