The Pound US Dollar (GBP/USD) exchange rate fell over a cent last week, as hawkish Federal Reserve interest rate expectations and a cautious market mood turbocharged USD demand.
Latest -- Exchange Rates:
Pound to Dollar (GBP/USD): 1.30964 (-0.01%)
Euro to Dollar (EUR/USD): 1.15105 (-0.03%)
Dollar to Japanese Yen (USD/JPY): 156.5935 (+0.13%)
WEEKLY RECAP:
The US Dollar (USD) strengthened through the first half of last week, underpinned by a cautious market mood.
This risk-off sentiment was triggered by equity market jitters and concerns over global growth, and drove investors towards safe-haven assets like the 'Greenback'.
The upside in USD was then compounded through the middle of the week, with the release of the minutes from the Fed's latest policy meeting.
The minutes showed that most policymakers are resistant to further easing, leading the odds for a December rate cut from the US central bank to fall dramatically.
This momentum then carried through into the latter half of the week, with the release of the latest non-farm payroll data.
September's delayed data showed the US economy added 119,000 jobs, smashing forecasts and cementing bets that a December rate cut is likely off the table.
The Pound (GBP) struggled to put up much resistance against the US Dollar last week amid a run of lacklustre UK economic releases.
The most notable pressure came with the release of the UK's consumer price index, which reported the first fall in inflation in five months and ramped up expectations the Bank of England (BoE) will press ahead with a December rate cut.
Underwhelming data at the end of the week also proved a headache for Sterling, as it reported a slowdown in the UK's vital services sector in November, as well as a surprise contraction in retail sales in October.
On top of this, GBP sentiment was also undermined throughout the session by a sense of caution ahead of the UK's autumn budget.
Near-Term GBP/USD Forecast: Markets Brace for UK Budget
The Pound US Dollar exchange rate is poised for a potentially volatile week, with the UK's highly anticipated autumn budget expected to dominate headlines.
Sterling will likely drift sideways until Wednesday, as traders hold off on major positions before seeing Reeves's fiscal priorities. Reaction to her proposals is then set to define GBP/USD's next moves.
If the budget raises doubts - whether due to limited detail, an emphasis on tax increases or insufficient reassurance for bond investors - the Pound could risk striking new multi-month lows.
Meanwhile, the coming week will see the release of a number of US economic indicators previously delayed by the US government shutdown, with the US Dollar potentially faltering if they also surprise to the upside, similarly to the payrolls figures.