Pound-Dollar could extend its six-month high if Jackson Hole fails to revive Fed tightening bets and US payroll revisions deepen labour market concerns.
The Pound US Dollar (GBP/USD) exchange rate stormed higher last week as markets were spooked by US debt concerns.
At the time of writing, GBP/USD was trading at around $1.3661. Up around 0.9% from the start of last week’s session.
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The US Dollar (USD) came under heavy selling pressure this week, with the ‘Greenback’ nosediving as growing concerns over the US fiscal outlook undermined confidence in the currency.
This was sparked by warning signs from the US Treasury market, where elevated long-term borrowing costs prompted the Treasury to announce a significant expansion of its bond buyback programme.
Concerns over the US fiscal outlook were compounded by reports that America’s national debt had reached a new record high of $40tn.
While able to soar to new multi-month highs against the US Dollar, the Pound (GBP) performance against its other peers proved more turbulent amid a deluge of UK economic releases.
The data made for mixed reading, with a weak jobs report and rise in inflation leaving Sterling to struggle in the first half of the week as it clouded the outlook for the Bank of England (BoE).
Attempts to rebound in the latter half of the week also quickly ran out of steam as a sharp slump in retail sales dragged on the Pound, leaving it unable to capitalise on an otherwise encouraging set of flash PMI figures.
Near-Term GBP/USD Forecast: Jackson Hole and Payrolls Revision in the Spotlight
Turning to the week ahead, there are a couple of key events which could infuse volatility into the Pound to US Dollar exchange rate next week.
First up is the Federal Reserve’s annual Jackson Hole symposium.
Jackson Hole has traditionally been used by Fed Chairs to outline how the bank may shape monetary policy in the coming months, however, under Kevin Warsh, the Fed has moved to limit guidance, which may come as a disappointment to USD investors.
The other focus will be on the US Bureau of Labor Statistics annual revision to non-farm payrolls, which could place significant pressure on the ‘Greenback’ if the US labour market added fewer jobs than expected over the past twelve months.
Back in the UK, a lull in domestic releases means Sterling will likely take its cues from broader risk appetite and global market sentiment.
Our currency coverage draws on live market data, official economic releases and published bank research.
