GBP USD Exchange Rate: The Week Ahead August 01st
When the pound dipped into the 1.19 range against the dollar on Monday, as the currency struggles for impetus during a data-light week in the UK.
After edging back into the 1.20 range, the pound remained largely rangebound before events on the other side of the Atlantic – and subsequent dollar weakness – woke it from its slumber.
On Wednesday, the US Federal Reserve announced another three-quarter percentage point hike in its benchmark interest rates – the second supersized increase in just over a month.
Analysts expected a rate rise. However, the Fed’s dovish comments that followed weren’t – and weighed on the dollar.
After the central bank’s July meeting, Fed Chair Jerome Powell said the next rate decision would be determined by the strength of upcoming economic data, triggering bets on a slower hike.
Bank of England interest rate decision in focus for the pound
In contrast to last week’s sparse UK economic calendar, there’s plenty to keep investors busy over the coming days.
On Monday, the final reading of July’s manufacturing PMI hit headlines, which is forecast to hold steady in expansion territory. Two days later, the final composite reading – spanning services and manufacturing businesses –will likely remain unchanged above the expansion threshold.
The Bank of England (BoE) will be in the spotlight on Thursday when it announces the result of its latest interest rate vote. Last week’s Fed hike pressured the BoE to follow suit by stamping down harder on red-hot inflation.
The UK central bank is mulling over a half percentage point increase in what would be its most significant rate rise in almost 30 years, which could see the pound leap in value.
Additionally, any hawkish or dovish comments from BoE governor Andrew Bailey in the post-announcement press conference could trigger UK currency movement.
Jobs data in focus for the dollar
Wells Fargo – the third largest bank in the US regarding assets and deposits – predicts the US currency will remain dominant over the coming weeks. “We continue to forecast a stronger US dollar against most foreign currencies through early 2023,” says Nick Bennenbroek, International Economist at Wells Fargo Securities.
In the short term, the market will view Friday’s eagerly anticipated jobs report from the US Bureau of Labour Statistics through the lens of recession.
The domestic economy is officially in a technical recession after data showed GDP shrank in both the first and second quarters. But by its definition, the Fed doesn’t see a broad-based decline in economic activity as several pockets of growth are still evident – including jobs.
They could rethink this optimistic view if the non-farm payrolls reading meets the forecast. Economists expect the number of new jobs in all non-agricultural businesses to fall to 250,000 in July from 372,000 in June.
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The post GBP USD Exchange Rate: The Week Ahead August 01st appeared first on Pound Sterling Forecast.
Source: https://www.poundsterlingforecast.com/2022/08/gbp-usd-exchange-rate-the-week-ahead-august-01st%e2%80%af/
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