ExchangeRates.org.uk - The Pound US Dollar (GBP/USD) exchange rate fell last week as shifting interest rate expectations and UK budget uncertainty weighed on the pairing.
At the time of writing, GBP/USD traded at $1.3074, down around 0.4% on the week. The Pound (GBP) struggled at the start of last week’s session as Bank of England (BoE) interest rate cut bets dampened GBP’s appeal, following dovish comments from BoE Governor Andrew Bailey the week before. Reports that Chancellor Rachel Reeves would adjust the government’s fiscal rules to create more headroom to fund investment then cheered GBP investors, before claims that the Treasury’s revenue-raising plans were in ‘complete disarray’ saw this optimism fizzle out and dragged the Pound lower.
At the very end of the week, Sterling was able to recoup some of its losses. New UK GDP data showed that the British economy returned to growth in August, thereby lifting the Pound. However, GBP/USD remained down on the week. Meanwhile, the US Dollar (USD) enjoyed the afterglow of the previous week’s stronger-than-forecast payroll figures, as investors continued to rein in bets on another 50bps Federal Reserve interest rate cut. This was reinforced by the Fed’s September meeting minutes, published Wednesday evening, as they showed that most policymakers saw last month’s half-point cut as a one-off, with further easing expected to be more gradual.
Mixed data on Thursday prevented USD from climbing higher. American inflation cooled in September, although less than expected, while new jobless claims leapt to a 14-month high. Looking ahead, we could see some big swings in the GBP/USD exchange rate this week amid high-impact data on both sides. The first major release is the UK’s August labour market report, due Tuesday, which could prompt a selloff in the Pound. At the time of writing, forecasts see the UK unemployment rate leaping from 4.1% to 4.6%, which would be its highest level in three years.
In addition, wage growth is expected to cool. The UK consumer price index on Wednesday could dent GBP, if core inflation eased notably last month, as expected. And Friday could bring more losses for GBP amid an expected decline in UK retail sales. In the US, an uptick in American retail sales could be offset by rising jobless claims on Thursday, if new data prints as expected.
This content was originally published on ExchangeRates.org.uk