GBP USD Impact After UK PM Registration – The Week Ahead July 11th
The pound lurched from one two-year low against the dollar to another last week. On Tuesday, the UK currency felt the pressure of waning market optimism before sliding below 1.19 the following day for the first time since March 2020.
Recession concerns around the world and future UK economic growth were compounded by the resignation of two senior government ministers, including former Chancellor Rishi Sunak – which opened the floodgates for a wave of ministers to follow him out the door.
The pound rallied on Thursday after reports Boris Johnson would quit as Prime Minister amid the telling show of no confidence within his own party.
However, rising household costs and slowing growth continue to cast a cloud over the UK economy – and the pound.
The dollar, supported by its safe-haven status throughout the week, received a further boost from a stronger-than-expected jobs report on Friday that stoked expectations of Federal Reserve hawkishness.
Political and economic developments in focus for the pound
UK politics will continue to drive sentiment towards the pound this week, with the removal of near-term political uncertainty potentially encouraging investors.
These market participants will keep a close eye on the 1922 Committee – the organising body for Conservative MPs – which has the power to rewrite party rules on leadership challenges and oust Johnson before a new PM is in place.
Tuesday’s speaking engagement for Bank of England governor Andrew Bailey at an event hosted by the Official Monetary and Financial Institutions Forum will be scrutinised for comments about the UK’s economic health.
The monthly GDP print on Wednesday stands out during a relatively data-light week in the UK. Official figures showed that the UK’s GDP – a measure of the total goods and services produced – dropped by 0.3% in April. Economists expect zero growth in May.
Inflation data in focus for the dollar
Monetary policy divergence between the Federal Reserve and BoE could continue to be a catalyst for the dollar, with the pace of rate hikes in the US outstripping the UK.
The June consumer price index looms large on Wednesday. This closely watched gauge of inflation is forecast to be hotter than May’s 8.6% year-over-year pace, stoking expectations of aggressive Fed policy tightening to cool prices.
The June producer price index – an indicator of commodity inflation – hits the headlines on Thursday. On Friday, the University of Michigan consumer sentiment report for July and retail sales for June combine to provide a measure of US consumer confidence.
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The post GBP USD Impact After UK PM Registration – The Week Ahead July 11th appeared first on Pound Sterling Forecast.
Source: https://www.poundsterlingforecast.com/2022/07/gbp-usd-impact-after-uk-pm-registration-the-week-ahead-july-11th/
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