The British Pound to US Dollar (GBP/USD) exchange rate recorded market movement of +0.45% in the start of Monday’s European session after recording its biggest depreciation in four years on Friday as a result of Bank of England (BoE) and Federal Reserve interest rate hike speculation.
As some economists believe strong labour market data will encourage the Fed to boost rates first, others think the Bank of England could still pip them to the post.
Earlier… The British Pound to US Dollar (GBP/USD) exchange rate sank on Friday when upbeat US Unemployment Rate and Change in Non-Farm Payrolls figures emerged.
Change in Non-Farm Payrolls jumped by 295K in February rather than the 235K forecast. January’s ecostat was negatively revised to 239K. The increase in jobs allowed the Unemployment Rate to drop to 5.5% from 5.7%.
Economist Tom Porcelli stated: ‘It’s been looking extremely constructive over the past few months, at the very least it probably gives some people pause for cutting down their GDP expectations this year.’
‘We had already generated a million jobs in the previous three months, the economy is generating more job growth than we think it has the ability to do. While the summers have been very robust, at some point we’ll have to see the slowdown to some extent.’
The US Federal Reserve has repeatedly stated that an increase in interest rates would be driven by favourable US labour market data. As a result, investors eye unemployment data closely and price in borrowing cost rises accordingly.
However, the week ahead could see further GBP/USD swings as investors hedge their bets for which central bank—the Bank of England (BoE) or the Federal Reserve—will be the first to raise interest rates.
Strategist Bruce McCain commented: ‘Any sign of undue strength will raise the spectre of rates climbing sooner than expected, and we were already expecting rates to rise this year.’
British Pound to US Dollar (GBP/USD) Exchange Rate Forecast
The British Pound to US Dollar (GBP/USD) exchange rate will have several opportunities to fluctuate next week with some highly influential data scheduled to emerge.
The start of the week will be pretty quiet in terms of data releases, leaving a lot of GBP/USD movement up to central bank speculation and global developments. However, Wednesday’s trading will heat up with UK Industrial Production and Manufacturing Production figures due for publication.
In addition, US MBA Mortgage Applications will also emerge and could offer the ‘Buck’ some moderate movement.
However, Thursday is when things will really get interesting with UK Trade Balance ecostats out as well as the highly anticipated US Advance Retail Sales. Economists are forecasting 0.5% growth in February’s retail stats after January’s -0.8% contraction. Meanwhile, the UK’s trade deficit is expected to improve from £-2.89B to £-2.30B.
Friday will continue on with the stream of exciting data as both UK Construction Output and US University of Michigan Consumer Confidence stats reach publication. Forecasts suggest consumer sentiment could increase slightly from 95.4 to 95.45 in March. Even a modest improvement could be an event to offer support to the US Dollar to British Pound (USD/GBP) exchange rate.
The British Pound to US Dollar (GBP/USD) exchange rate will also be sensitive to any speculation surrounding a possible policy divergence ahead of the BoE meeting minutes released in the next few weeks.
On Saturday the British Pound to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5035
