This report was created by OXShare
On Friday, the British pound strengthened relative to the US dollar due to better-than-expected UK Gross Domestic Product (GDP) numbers and a weaker dollar. The GBP/USD pair continued to rise for the second consecutive day, with a trading range of approximately 1.2230.
The GDP of the UK in the third quarter remained stable, surprising the market’s expectations of a slight decrease of 0.1%. Instead, there was no change in the economy compared to the previous quarter, and the year-on-year growth was 0.6%, exceeding the forecasted 0.5%. These positive results were achieved despite worries about the UK’s economic future, as indicators suggest a difficult period of stagflation, marked by high inflation and increasing levels of unemployment.
On the other hand, there was a more careful attitude in the United States after Federal Reserve Chair Jerome Powell made his comments on Thursday. Powell expressed uncertainty about the ability of the current policies to reach the central bank’s goal of 2% inflation, implying a more cautious approach that indicates there may be future increases in interest rates.
In addition to the sense of hesitation, initial findings published on Friday indicated a decrease in American consumer confidence. The Consumer Sentiment Index, conducted by the University of Michigan, fell from 63.8 to 60.4 in November, highlighting rising worries among consumers.
Looking to the future, currency markets are likely to be affected by important economic data releases next week. Traders are especially interested in the upcoming employment and inflation reports in the UK, scheduled for Tuesday, along with the US Consumer Price Index (CPI). The CPI will offer new information on inflation trends and could potentially shape decisions made by central banks.
The GBP/USD exchange rate experienced fluctuations over the past week due to conflicting messages from central banks and economic data announcements. The Bank of England made optimistic remarks indicating a potential increase in interest rates, but worries about the strength of the UK economy caused the value of the British Pound to slightly decrease, ending the week at $1.2211.
Aside from internal factors, global occurrences also had an impact on the fluctuation of currencies. At the beginning of the previous week, China unexpectedly revealed a reduction in its trade surplus, leading to a rush towards safer currencies which initially boosted the value of the US dollar. Nonetheless, cautious statements from the Federal Reserve and employment figures in the United States that were lower than anticipated subsequently weakened the strength of the dollar.
Market participants are preparing for important economic data from both the US and the UK next week. The inflation numbers will be closely monitored, with the US core inflation predicted to stay at 4.1%. This could strengthen the belief in Federal Reserve rate hikes and help the dollar. However, the UK’s core inflation is expected to decrease from 6.1% to 5.8%, which might reduce expectations for rate increases by the Bank of England and have a negative effect on the value of the Sterling. Additionally, the upcoming employment data in the UK will be carefully examined for any potential impact it may have on currency volatility.