Last week was a relatively bearish one for the US Dollar, as trade jitters and the latest US data caused investors to sell the currency. The British Pound to US Dollar (GBP/USD) exchange rate was one of the few major Pound pairs to advance throughout the week.
After opening the week at the level of 1.3206, GBP/USD briefly slipped into the region of 1.31 before advancing in the second half of the week. On Friday afternoon, GBP/USD trended near a weekly high of 1.3278 before European markets closed for the week.
GBP Benefits from USD Weakness Despite Brexit Jitters
The primary cause of the Pound’s gains towards the end of last week was weakness in US Dollar trade, as the British currency saw poor performance against other majors amid the latest Brexit jitters.
On Thursday, JPMorgan confirmed that it would begin to move UK staff over to continental Europe in the coming months in an effort to limit the potential damage the Brexit process could do to the business.
Airbus joined the chorus of businesses expressing concern about the Brexit process on Friday, urging the UK government to do more to offer clarity to UK businesses.
Economists and businesses remain highly concerned that a ‘no deal’ Brexit could lead to the loss of many UK jobs, which has prevented the Pound from benefitting from rising Bank of England (BoE) interest rate hike bets.
USD Sold on Fed Caution and Slow Wage Growth
The Federal Reserve’s latest meeting minutes were published on Thursday. While generally optimistic about the US economic outlook, the bank did express concern about the possibility that US trade tariffs and protectionism could impact the US economy.
This dampened US Dollar performance throughout Friday’s session, and USD only weakened further following the publication of the latest US Non-Farm Payroll report.
While the latest US jobs data was solid in most stats, with the Non-Farm Payroll chance beating forecasts, the latest wage data was concerning to some analysts.
US average hourly earnings were forecast to remain at 0.3% month-on-month and improve from 2.7% to 2.8% year-on-year.
However, the results came in with disappointing figures of 0.2% and 2.7% respectively. This worsened market concerns that wage inflation was weak.
Some analysts even noted that it made the Federal Reserve a little less likely to continue hiking US interest rates at an aggressive pace, so the US Dollar saw weaker trade before markets closed on Friday.
GBP/USD Forecast: UK Growth Switches to Monthly Figures
Next week will see the publication of Britain’s first monthly Gross Domestic Product (GDP) report – from May.
Previously, UK growth reports had all been quarterly. While the change to monthly figures itself is unlikely to lead to any big shocks, the data report itself is still likely to be highly influential.
Most of next week’s most influential UK data will be published on Tuesday, including the May growth report, as well as Britain’s May trade balance and production stats. NIESR will be publishing its Q2 GDP estimate on Tuesday too.
As for the US Dollar, next Thursday will see the publication of June’s key US Consumer Price Index (CPI) results, which could influence Federal Reserve bets.
As the latest US wage data disappointed investors, Fed bets and the US Dollar could fall if June’s US inflation data disappoints too. This would make it easier for GBP/USD to advance further.
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TAGS: Pound Dollar Forecasts