USD/GBP Outlook:
The USD/GBP exchange rate is slightly positive, but likely to move sideways as it trades near its 3-month average. Recent strong US jobs data supports the dollar, while uncertainties around the UK economy pressure the pound.
Key drivers:
- Rate gap: The US Federal Reserve's cautious approach towards future interest cuts contrasts sharply with expectations for a Bank of England rate cut, contributing to USD strength.
- Risk/commodities: Recent volatility in oil prices has elevated risk appetite, generally benefiting the dollar as a safe haven at times of uncertainty.
- One macro factor: Rising unemployment in the UK, along with slowing wage growth, has sparked concerns over economic stability, prompting speculation about easier monetary policy from the BoE.
Range:
The USD/GBP is likely to drift within a stable range, as it has shown resilience near recent highs.
What could change it:
- Upside risk: Stronger-than-expected US economic data could boost the dollar further.
- Downside risk: A significant decline in UK inflation could lead to accelerated BoE rate cuts, weighing down the pound.
