The GBPUSD exchange rate will complete a bumper week of economic data with the Bank of England rate meeting and US retail sales.
The GBPUSD pair has the 1.2667 level in sight, which could come close on Thursday if the data support the pound.
GBPUSD Weekly Chart
The US dollar was weaker despite the Federal Reserve hiking interest rates by another 50 basis points. Jerome Powell said he did not expect a recession after the rate hike. “I don’t think SEP projections qualify as projecting a recession, but the economy will have very slow growth,” he said. He added that a 4.7% unemployment rate is still a strong labour market.
The US dollar was hurt by comments on rate hikes, with Powell saying, “Having moved so quickly, we think the right thing to do is to move to a slower pace of rate hikes.” That will allow us to better balance risks. By now, we would have expected faster progress on inflation.
This hints that the bank is not done with rate hikes but that the pace of those will slow.
The US central bank has hiked interest rates at the fastest pace in decades as it tries to tackle hot inflation. Earlier this month, Federal Reserve Chairman Jerome Powell said that the bank would start to slow the pace of rate hikes, and the dollar has been declining.
For retail sales, the US economy hopes to bounce back from last month’s -0.1% print. That dropped from 1.3% in the previous month and is a worrying sign as inflation continues to hurt wages.
The Bank of England will make its own rate hike decision on Thursday. However, with inflation still at 10.7%, a significant rate hike is inevitable. That could be the spark that pushes the GBPUSD to the 1.2800 level.
