The Pound to US Dollar (GBP/USD) exchange rate traded erratically last week trading just shy of $1.38 and closing the session at around $1.3791
US Dollar (USD) Exchange Rates Tumble Following Dire US GDP Print
The US Dollar (USD) initially got off to a solid start last week, with the currency rising in tandem with US Treasury yields, in anticipation of an impending tapering announcement from the Federal Reserve
These gains were then reinforced by a cautious market mood, with made the safe-haven currency more attractive to investors.
However, the US Dollar then began to run into resistance in the middle of the week, with the publication of the latest US durable goods figures, after they reported a 0.4% contraction in September and revised August’s order growth down from 1.8% to 1.3%.
Accelerating this downtrend in the latter half of the week was the publication of the latest US GDP figures.
These reported that the pace of economic growth in the US more than halved in the third quarter, with the preliminary GDP reading reporting growth slowed from 6.7% to 2%, missing forecasts for a more modest decline to 2.7% and raising concerns over the resilience of the US economic recovery.
Pound (GBP) Exchange Rates Fluctuate Following Autumn Budget
At the same time, the Pound (GBP) has traded in a wide range over the past week, in response to the UK’s Autumn Budget and renewed Brexit uncertainty.
Sterling initially enjoyed some support on the back of the Confederation of British Industry’s (CBI) latest distributive trade index, after it reported a far stronger-than-expected growth in retail trade volumes this month.
But GBP exchange rates quickly fell back following the publication of Chancellor Rishi Sunak’s Autumn budget, after it received a lukewarm response from investors, particularly as the Office for Budget Responsibility’s (OBR) accompanying forecasts, highlighted the damage being done to the UK economy by Brexit.
This fed into renewed Brexit jitters through the second half of the week, with the escalation of a spat over fishing rights between the UK and France, stoking concerns over the state of ongoing negotiations regarding the Northern Ireland protocol.
GBP/USD Exchange Rate Forecast: Fed and BoE Rate Decisions in the Spotlight
Turning to this week’s session, the Bank of England’s (BoE) and Federal Reserve’s latest interest rate decisions will no doubt act as the primary catalysts of movement in the Pound to US Dollar (GBP/USD) exchange rate.
In terms of the Bank of England, with it no longer expected to announce a rate hike in November, the focus will be on its forward guidance, particularly regarding the possibility of it still hiking interest rates by the end of 2021.
If the bank signals a December rate hike may be on the cards and also hints at multiple hikes in 2022 then the Pound could soar.
Meanwhile, the Federal Reserve is widely expected to formally announce its tapering plans this week, with USD investors eager to see at what pace the Fed will be willing to start reducing its asset purchases, with a relatively short timetable potentially bolstering USD exchange rates.
Also influencing the US Dollar will be the publication of the latest US non-farm payroll figures.
GBP/USD Short (Sell)
Enter At: 1.3639