The Pound to US Dollar (GBP/USD) exchange rate experienced significant volatility last week, briefly touching a four-month high before settling as investors reacted to key interest rate decisions from both the Federal Reserve (Fed) and the Bank of England (BoE).
As of the latest update, GBP/USD stands at $1.2944, showing minimal movement from the week’s opening level. However, ongoing economic uncertainty and central bank policies could drive further fluctuations in the currency pair.
Pound Sterling (GBP) Rises Despite UK Economic Concerns
At the start of the week, the British Pound (GBP) strengthened against the US Dollar (USD) despite concerns over the UK’s economic outlook. The Organisation for Economic Co-operation and Development (OECD) revised its 2025 UK growth forecast downward, sparking fresh worries about the country’s financial trajectory.
Leading up to the Bank of England’s (BoE) interest rate decision, GBP exhibited mixed movements. While the BoE held rates steady as expected, policymakers adopted a slightly more hawkish stance, indicating persistent uncertainty around inflation and economic growth.
US Dollar (USD) Reacts to Federal Reserve’s Growth Forecast
Meanwhile, the US Dollar (USD) weakened early in the week, weighed down by growing fears of a potential US recession. However, as the Federal Reserve’s rate decision approached, the ‘Greenback’ wavered in anticipation of key economic updates.
The Fed’s decision to cut US growth forecasts triggered a sharp drop in the USD, causing GBP/USD to surge to its highest level in over four months. However, this rally was short-lived as the USD rebounded strongly due to a souring market sentiment, leaving the GBP/USD exchange rate relatively unchanged by the end of the week.
Key GBP/USD Forecast Factors for the Week Ahead
Several high-impact data releases could influence the GBP/USD exchange rate in the coming days:
UK Economic Data to Shape Pound (GBP) Outlook
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UK PMI Surveys (Early Week): If British private sector activity remains sluggish, the Pound could face early losses.
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UK Inflation Data (Midweek): The Consumer Price Index (CPI) for February is expected to show persistently high inflation, potentially reducing expectations of a BoE rate cut in May, which may provide support for GBP.
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UK Retail Sales (Friday): Markets anticipate a sharp slowdown in retail sales growth, which could put downward pressure on the Pound.
US Economic Data Could Drive US Dollar (USD) Trends
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US Q4 2024 GDP Data (Midweek): If the final GDP figures confirm an economic slowdown, the US Dollar may weaken further.
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US Core PCE Price Index (Friday): As the Fed’s preferred inflation gauge, any upward movement in the Core PCE Index could support USD, possibly pushing GBP/USD lower by the end of the week.
GBP/USD Exchange Rate Outlook: Will Volatility Persist?
With central bank policies, inflation data, and economic growth figures in focus, the GBP/USD exchange rate is likely to experience continued volatility. If UK inflation remains high and BoE rate cut expectations diminish, the Pound could gain further traction. However, a stronger-than-expected US inflation report may bolster the Dollar, limiting GBP/USD upside potential.
Traders and investors will closely watch economic indicators from both economies to gauge the next direction of the Pound to Dollar exchange rate in the days ahead.
