The Pound US Dollar (GBP/USD) exchange rate traded in a wide range last week, in response to central bank commentary and market volatility, ahead of UK GDP reports.
What’s Been Happening: GBP/USD Volatile on Fluctuating Rate Hike Bets
The Pound (GBP) initially firmed against the US Dollar (USD) last week, hitting a six-week high on Monday, as hawkish commentary from the Bank of England (BoE) left investors betting on further interest rate hikes.
The ‘Greenback’ then edged higher against the increasingly risk-sensitive Pound on Tuesday, as bleak Chinese trade data led skittish investors toward the safe-haven USD during a spell of gloomy trade.
Sterling retreated further midweek, as UK recession fears undermined the possibility of further rate hikes, echoed in BoE Chief Economist Huw Pill’s dovish remarks. At the same time, USD stumbled following the latest US employment data, with signs of a gradually loosening US labour market serving to dent Federal Reserve rate hike bets.
The end of the week saw GBP exchange rates slump under disappointing GDP data. Meanwhile USD surged following a notably hawkish speech from Fed Chair, Jerome Powell.
Three Things to Watch Out for This Week
- US Inflation Rate
The publication of the latest US inflation data may drive USD volatility on Tuesday. Will sticky US inflation lift Fed rate hike bets, and boost USD?
- UK Inflation Rate
Like it’s US counterpart, the UK’s inflation data may be highly impactful on Wednesday. Could cooling UK inflation pull GBP lower as it further undermines BoE rate hike bets?
- UK Unemployment Rate
The UK’s latest employment data is due out on Tuesday. A slight uptick in UK unemployment could fuel concerns of a slowing UK economy, thereby denting BoE rate hike bets and pressuring the Pound.
Pound US Dollar Forecast
Amid a data heavy week, the latest inflation print is likely to be the main catalyst of GBP/USD volatility. The currency pairing may remain vulnerable to central bank commentary following key releases.