Last week’s high: $1.4274
Last week’s low: $1.3984
Investors Send US Dollar Higher
The Pound to US Dollar exchange rate was sold from near its best levels on Friday afternoon as investors reacted to the latest US Non-Farm Payroll report, which was generally impressive and rounded off a week of strong US data.
The change in Non-Farm Payrolls figure beat 180k forecasts and came in at 200k. Investors were also impressed by the latest wage data, which came in at 2.9% year-on-year and well above the expected 2.6%. What’s more, the previous figure was revised higher from 2.5% to 2.7%. Overall the data indicated that US wage pressures were improving.
Impressive job data alongside strong PMIs from ISM and a more hawkish Federal Reserve gave US Dollar investors plenty to be more bullish about, which made the recently cheap US Dollar look more appealing.
Sterling investors have been speculating about the possibility of a more hawkish Bank of England (BoE), but underwhelming UK manufacturing data weighed on the currency’s appeal. As a result, GBP/USD ended the week closer to its opening levels despite climbing for most of the week.
USD Outlook: Bank of England in Focus
US data is likely to take a backseat this week, but the US Dollar’s recovery rally could continue following last week’s rebound. This could mean GBP/USD will fall in the coming sessions – at least unless Bank of England (BoE) speculation supports Sterling.
Next Thursday will see the Bank of England hold its first policy decision of 2018, and while the bank is not expected to make any changes to monetary policy, it may still adopt a significant change in tone.
Last week, BoE Governor Mark Carney indicated that the bank was going to refocus on tackling UK inflation, causing speculation that the bank was preparing to tighten UK monetary policy more in 2018 than previously expected.
If the bank is more hawkish in this week’s meeting, GBP/USD is likely to strengthen. However, if the bank remains cautious due to recent mixed UK data it’s likely the US Dollar’s potential recovery rally will see less resistance from Sterling.
Key US data could influence GBP/USD too, including Monday’s non-manufacturing PMI from ISM and December trade data on Tuesday.
09:30 UK Services and Composite PMI
15:00 US Non-Manufacturing PMI
13:30 US Balance of Trade
12:00 UK Bank of England Policy Decision
13:30 US Jobless Claims
09:30 UK Balance of Trade
09:30 UK Manufacturing and Industrial Production
15:00 US Wholesale Inventories
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Senior Currency Broker
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