GBP Falls Ahead of Fed Decision Amid Escalating Middle East Tensions
The Pound (GBP) weakened against the US Dollar (USD) on Monday as expectations of a Federal Reserve interest rate hike boosted the 'Greenback'. The GBP/USD exchange rate dropped to $1.3473, down 0.4% on the week.
The US Dollar strengthened due to market anticipation of a Fed rate hike this week, with traders buying the currency ahead of the central bank's decision on Wednesday evening. The safe-haven status of the USD also attracted support amid escalating tensions in the Middle East, which rattled markets following Yemen's Houthi rebels intensified attacks on Saudi Arabian energy infrastructure.
The Pound lacked momentum on Monday as Sterling traders remained cautious ahead of a packed run of UK economic events, including the release of UK labour market figures, consumer price index, Bank of England interest rate decision, and retail sales data. The number of potential catalysts on the horizon left GBP traders hesitant to make significant moves, keeping the Pound subdued.
The near-term forecast for GBP/USD suggests that a weaker labour market could put pressure on the Pound, especially with the Bank of England's interest rate decision only two days away on Thursday. The UK employment report on Tuesday will be a crucial test for Sterling, with unemployment expected to have risen from 4.9% to 5% in the three months to July.