The Pound to Dollar (GBP/USD) exchange rate is set to remain sensitive to economic developments, with upcoming US economic data likely to influence its performance this week.
Volatile Week Recap: GBP/USD Movements
Last week, the GBP/USD exchange rate displayed volatility due to the latest interest rate decisions from the Federal Reserve (Fed) and the Bank of England (BoE).
US Dollar Performance:
Monday: The US Dollar (USD) faced mixed outcomes due to contradictory domestic PMI results and an uncertain market sentiment.
Tuesday: The release of US retail sales data provided modest support for the USD ahead of the Federal Reserve’s December interest rate meeting.
Wednesday: The Fed enacted a widely anticipated interest rate cut and delivered hawkish forward guidance, boosting USD strength.
Friday: The core Personal Consumption Expenditures (PCE) price index remained steady at 2.8%, below expectations of 2.9%, creating headwinds for the USD to end the week.
Pound Sterling Performance:
Monday: The GBP strengthened due to better-than-expected services PMI figures.
Tuesday: Higher-than-anticipated wage growth further bolstered Sterling.
Wednesday: Strong inflation data supported GBP gains.
Thursday: Sterling weakened after the BoE maintained interest rates but revealed a more dovish-than-expected Monetary Policy Committee split.
Friday: UK retail sales data showed a rise in consumer spending but fell below market expectations, leaving the Pound mostly unchanged.
Key Drivers for GBP/USD Exchange Rate This Week
US Economic Data Releases
The USD is expected to remain volatile as key US economic indicators are published:
Monday: CB Consumer Confidence Index
Tuesday: Durable Goods Orders
Thursday: Initial Jobless Claims
Any significant deviation from market expectations in these releases could lead to fluctuations in USD exchange rates.
UK Economic Outlook
Monday: The UK’s final Q3 GDP figures are due. A slowdown from 0.5% to 0.1% is anticipated, which could weigh on GBP performance.
Remainder of the Week: With no major economic releases scheduled, the Pound might trade without a clear directional trend.
Technical Outlook for GBP/USD
The Pound to Dollar exchange rate is likely to react sharply to unexpected economic data and market sentiment shifts. Traders will closely monitor US releases for insights into Federal Reserve policy directions and the overall strength of the US economy. Likewise, the UK’s GDP figures will provide critical guidance on the state of the British economy heading into 2024.