The Pound US Dollar (GBP/USD) exchange rate skyrocketed at the end of last week, amid poor US jobs data.
What’s Been Happening: US Dollar Slumps as Labour Market Cools
At the start of the week, the US Dollar (USD) stumbled amid a cheery market mood. However, waning risk appetite allowed USD exchange rates to quickly recover on Tuesday.
Wednesday brought volatile trade to the US Dollar. While the ISM manufacturing PMI printed far below forecasts, JOLTs job openings for September eclipsed its estimates.
The Federal Reserve then took to the stage, leaving interest rates unchanged as expected. This sharply improved the market mood, causing USD to falter.
This downward momentum continued through to the end of the week, with USD slumping on the back of dismal employment data. Non-farm payrolls for October fell far below forecasts, leading to perceptions of slack in the US labour market and an end to the Fed’s tightening cycle.
Last week, the Pound (GBP) began quietly, due to a lack of impactful data releases. This subdued trade continued through the middle of the week, as investors looked ahead to the Bank of England’s (BoE) interest rate decision.
As expected, the BoE kept rates as they are. The bank also warned there is a 50% chance of a recession, injecting considerable volatility into Sterling in the process.
However, Friday’s bullish market impulse sent GBP exchange rates soaring. Despite a lull in data, GBP climbed to a two-month high against the beleaguered US Dollar.
Three Things to Watch Out for This Week
- UK GDP
On Friday, the UK’s third quarter GDP data is due to release, with economists anticipating a 0.1% contraction. This could weigh heavily on GBP.
- Fed Chair Powell Speech
Fed Chair Jerome Powell is due to speak on Wednesday. If he strikes a hawkish tone, USD could strengthen as investors bet on a final hike.
- BoE Pill Speech
BoE Chief Economist Huw Pill is due to speak later today. Could hawkish remarks strengthen Sterling?
Pound US Dollar Forecast
The GBP/USD could gain further traction this week if the market mood remains upbeat, which could lift Sterling against safer peers.