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Pound US Dollar (GBP/USD) Exchange Rate Forecast: Another Bruising Week Ahead for USD?

Stacks of US Dollar (USD) banknotes.

Pound US Dollar (GBP/USD) Exchange Rate Retreats as Risk-On Rally Fades 

The Pound US Dollar (GBP/USD) exchange rate softened this morning as the recent upbeat mood in markets begins to falter, thereby supporting the safe-haven US Dollar (USD). 

At the time of writing, GBP/USD is trading at around $1.2092, down from yesterday’s high of $1.2147. 

Looking ahead, Sterling could be in for further losses, but thin trading conditions may mean movement is limited. Next week, expectations of softer US data may mean more losses for the ‘Greenback’. 

Pound (GBP) to Slip Further amid ‘Bleak Friday’? 

The Pound (GBP) has retreated a little against the US Dollar today, as a souring market mood trims the riskier Pound’s recent gains. 

Still, Sterling is retaining most of the ground won against the ‘Greenback’ over the course of this week, with GBP/USD currently trading just shy of the three-month high hit yesterday. 

GBP could be in for further losses as the day unfolds amid worries about the UK’s retail sector. 

Today is Black Friday – an important day for retailers as they try to entice shoppers with discounts. However, cash-strapped Britons are curbing their spending ahead of Christmas due to the UK’s cost-of-living crisis. 

In addition, Royal Mail workers are on strike and workers at retail giant Amazon are planning protests, with the disruption creating further headwinds for the UK’s struggling retailers. 

The Centre for Economics and Business Research (CEBR) thinktank has called today ‘Bleak Friday’, saying: 

‘The cost-of-living crisis, combined with warnings that discounts are often more generous at other times of year and the threat of a Royal Mail strike, will mean that it is a weak year for Black Friday sales and we may see January sales start early in an attempt to shift stock.’ 

These concerns may bring further losses for GBP/USD today. 

Next week brings a rather sparse calendar for UK economic data. Risk appetite and domestic news could be the driving factors for GBP exchange rates. 

US Dollar (USD) Inches Higher amid Risk-Off Trade 

Meanwhile, the US Dollar is eking out meagre gains following a bruising week. 

Markets have drastically scaled back expectations for further Federal Reserve interest rate rises after weak US data and dovish meeting minutes from the Federal Open Market Committee (FOMC). 

Today, however, market sentiment is starting to sour, giving the safe-haven ‘Greenback’ some support. Surging Covid cases in China have led to strict new lockdowns, as Beijing pursues its brutal zero-Covid policy. Markets fear this could worsen a coming global economic downturn, with the effects rippling out through the world economy. 

If the market mood remains downbeat, USD could continue to tick higher. However, movement may be limited due to a lack of economic data and thin trading conditions following Thanksgiving; US markets were closed yesterday and will end early today. 

As a result, it looks as though the ‘Greenback’ will end the week having ceded significant ground to the Pound. 

Looking ahead to next week, some high-impact US data releases are on the way. The latest US jobs data is forecast to show a slowdown in the labour market, while the core PCE price index – the Fed’s preferred measure of inflation – and average hourly earnings are expected to show that inflationary pressures continue to ease. These results could weigh heavily on USD exchange rates. 

In addition, a number of Fed speeches – including from Fed Chair Jerome Powell – could hurt USD, if policymakers continue to signal a slower pace of policy tightening moving forward. 

Finally, the ISM manufacturing PMI is set to reveal a stall in US factory activity. 

All in all, the US Dollar could face another bruising week. 

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