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Pound to Dollar Rate Christmas Week Outlook: US Data Key Risk Ahead

Published 23/12/2024, 09:00
© Reuters.  Pound to Dollar Rate Christmas Week Outlook: US Data Key Risk Ahead
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ExchangeRates.org.uk - The Pound US Dollar (GBP/USD) exchange rate experienced volatility last week following the publication of both the Federal Reserve’s and the Bank of England (BoE)’s latest interest rate decisions.The US Dollar (USD) began the week fluctuating against its peers on Monday as mixed domestic PMI results as well as an unclear market mood hobbled the American currency.

However, on Tuesday, the US released its latest retail sales data which offered the ‘Greenback’ some modest support ahead of the Federal Reserve’s December interest rate meeting, on Wednesday evening.

During its latest meeting, the Fed enacted a widely expected interest rate cut while also providing markets with its latest forward guidance.

As the Fed’s comments were largely hawkish in tone regarding the future of monetary policy, this saw USD exchange rates surge through to Thursday’s European session.

On Friday, America released its latest core PCE price index, which stayed at 2.8% rather than rising to 2.9% as expected, which saw the USD experience headwinds at the end of the week.

The Pound (GBP) began the week with a strong performance against its major counterparts, driven by the country's latest services PMI, which exceeded market expectations.

On Tuesday, Sterling continued its upward trend as wage growth figures came in higher than anticipated, further boosting investor confidence.

Wednesday brought additional positive news for the GBP, with both headline and core inflation figures showing a stronger-than-expected increase, which reinforced the currency's gains.

However, on Thursday, the Pound weakened against most of its peers following the Bank of England’s December interest rate decision.

Although the central bank maintained interest rates at their current level, as widely expected, the Monetary Policy Committee's voting split was more dovish than anticipated, leading to a decline in Sterling's value.

By the end of the week, the Pound's trajectory was mostly unchanged following the release of the UK's latest retail sales data, which did report a rise in the UK’s latest consumer spending, however, printed below market expectations.

GBP/USD Exchange Rate Forecast: US Data to Drive Movement?

Looking ahead, the primary catalyst of movement for the Pound US Dollar exchange rate looking at this week will likely be the publication of several economic releases from the US.

On Monday, the US will release its latest CB consumer confidence index, Tuesday will see the release of the country’s latest durable goods orders while Thursday will bring with it the US’s latest initial jobless claims.

Should any of the data releases deviate from market expectations, USD exchange rates could fluctuate during this week’s trading session.

As we look forward to the upcoming week for the Pound, Monday will see the release of the UK’s final GDP figures for the third quarter.

If the numbers match expectations and indicate a slowdown from 0.5% to 0.1%, this could weigh on GBP exchange rates as the week begins.

For the remainder of the week, there are no major economic data releases scheduled from the UK, which might result in Sterling trading without a clear direction.

This content was originally published on ExchangeRates.org.uk

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