ExchangeRates.org.uk - The Pound US Dollar (GBP/USD) exchange rate posted modest gains last week as growing concerns about the health of the US labour market prompted a further uptick in Federal Reserve interest rate cut bets. The pairing closed the week at around $1.3147.
US Dollar (USD) Slips amid Easing US Employment Worries
The US Dollar (USD) was largely rangebound as the week opened, as US markets closed in observance of the American Labor Day weekend. However, a modest increase in US Treasury yields lent USD light support overnight. On Tuesday, a disappointing ISM manufacturing PMI soured USD sentiment, with the index slowing to 47.2, in place of a softer contraction of 47.5. However, the safe-haven US dollar kept its head above water amid a risk-off market mood. Fresh signs of a cooling US labour market on Wednesday then weighed on USD exchange rates, as the latest JOLTs job openings fell to its lowest level in over three years. On Thursday, the latest ADP employment report reinforced these concerns, as the data revealed that the US private sector added a significantly lower number of jobs in August than forecast. However, later in the session, the latest ISM services PMI in the US unexpectedly rose to a three-month high, cushioning USD’s downside. As the week drew to a close, USD fell further as the high-impact non farm payrolls report came in lower than forecast. The data fuelled expectation that the Federal Reserve may have to enact an aggressive policy-easing cycle in the near term, thereby denting USD exchange rates.
Pound (GBP) Buoyed by Private Sector Growth
The increasingly risk-sensitive Pound (GBP) ticked higher at the start of the week, lifted by a risk-on mood and a strong finalised manufacturing PMI in the UK. On Tuesday, a data-light UK calendar saw softening Bank of England (BoE) interest rate cut bets pulled into view, thereby lifting the Pound. Mid-week, a stronger-than-forecast UK services PMI boosted appeal for the Pound, signalling ongoing signs of robust UK private sector activity and signalling further economic recovery across Britain. On Thursday, a cautiously upbeat market mood then lent GBP modest support against its safer rivals. As the week drew to a close, GBP was left largely rudderless amid an ongoing lull in UK releases and a deteriorating market mood.
Pound US Dollar Exchange Rate Forecast: US Inflation in Focus
This week, the focus for USD investors will likely be the latest US inflation release. Any signs of easing price pressures may weigh heavily on the ‘greenback’, signalling that a 50-basis points rate reduction by the Fed is around the corner. For the Pound, the UK’s latest GDP release is due mid-week. Could news of economic growth in July bolster Sterling sentiment?
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