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GBP/USD Exchange Rate Slumps as Fed Slashes Rates for First Time Since 2008

Last week’s high: $1.2376

Last week’s low:  $1.2087

Hawkish Fed Pushes US Dollar to Two-and-a-half Year High Against GBP

The Pound US Dollar exchange rate slumped at the start of the week, falling to its lowest level since January 2017.

US consumer spending and prices edged up in June, however the Fed’s preferred measure of inflation remained below its 2% target.

July’s US consumer confidence rebounded despite heightened trade tensions, which suggested consumer spending – accounting for around 70% of US economic activity – may rise.

On Wednesday, the US Federal Reserve cut interest rates for the first time since 2008.

The Dollar was buoyed by Fed Chair Jerome Powell’s unexpectedly hawkish comments, as the likelihood of further cuts in 2020 decreased.

However, GBP/USD was left flat at the end of the week as US-China trade tensions turned sour.

US President Donald Trump escalated tensions by threatening a further 10% tariff on $300 billion of Chinese goods.

On Friday, US unemployment remained steady at 3.7% and the country continued its record breaking streak of growth as 164,000 new jobs were added to the economy.

USD Outlook: Strong PPI to Buoy the Dollar

Looking ahead to Monday, the Dollar could slide against the Pound following the US PMI composite release.

If July’s PMI composite fails to rise as high as forecast, the ‘Greenback’ could slide against Sterling.

Meanwhile, if continuing and initial jobless claims edge up higher than expected, USD sentiment could slide.

At the end of the week, Sterling could slump following the UK flash GDP. If second quarter GDP disappoints, GBP/USD could slide.

The Dollar could edge up further following the release of the US Producer Price Index (PPI). If inflation rises higher than expected, this could buoy the ‘Greenback’.

Key Events

5th August

09:30   GBP UK Services PMI (July)

15:00   USD ISM Non-Manufacturing/Services Composite (July)

 

8th August

13:30   USD Initial Jobless Claims

13:30   USD Continuing Jobless Claims

 

9th August

09:30   GBP GDP (Q2 P)

09:30   GBP Industrial Production (June)

09:30   GBP Manufacturing Production (June)

09:30   GBP Construction Output (June)

13:30   USD Producer Price Index (July)

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