Since Donald Trump won the U.S. presidential election, the U.S. dollar (USD) has shown considerable strengthening. Market participants were left wondering how far this rally could extend, especially with key economic data releases in both the UK and the U.S., creating ample opportunities for volatility.
On Monday, despite the U.S. observing a bank holiday for Patriots’ Day, there was hope that the British pound (GBP) might recover some of the ground it had lost over the prior week. However, this was not the case. Instead, the GBP/USD (commonly referred to as “cable”) declined steadily throughout the day. While the absence of significant data from the UK could partly explain this, the prevailing sentiment around a resilient USD following Trump’s election and return to prominence appeared to underpin its strength.
By Tuesday, trading resumed with a relatively light schedule of economic releases, the key highlight being the UK’s Claimant Count Change published early in the morning. Forecasts had anticipated a significant rise from the previous figure of 10.1k to 30.5k. However, the actual figure came in at 26.7k—still a considerable increase but slightly below expectations. This outcome temporarily stalled the decline in the Sterling’s value against the USD, although it did push the Pound to new multi-year highs against the Euro (EUR). Later that day, comments from several Federal Reserve speakers, notably the hawkish Federal Open Market Committee (FOMC) member Christopher Waller during a moderated discussion at the Clearing House Annual Conference, bolstered the USD to fresh highs against both GBP and EUR.
On Wednesday, all eyes were on the U.S. Consumer Price Index (CPI) data, with traders and analysts eager to interpret the likely path of future rate cuts by the Federal Reserve. Ultimately, the data releases came in line with expectations, with the year-on-year figure rising to 2.6% from the previous 2.4%. This solidified the USD’s strength, though fears of a substantial drop in GBP/USD were tempered since the outcome had been largely priced in.
Thursday continued to reflect the trend of USD dominance, with the Pound hitting levels not seen since the surge last August. The Producer Price Index (PPI) was the main data release for the day, which again matched expectations. However, the drop in GBP/USD was not so much driven by these figures but rather by more long-term concerns about the relative health of the UK and U.S. economies. This sentiment was echoed in the evening when Federal Reserve Chair Jerome Powell reaffirmed the strength of the U.S. economy, emphasizing that the Fed was in no rush to cut interest rates. In the UK, Chancellor Rachel Reeves and Bank of England Governor Andrew Bailey spoke at the Mansion House dinner, where Reeves notably argued that regulations implemented after the 2008 financial crisis were stifling growth and that she would consider rolling them back—a statement met with mixed reactions.
The week concluded with Friday’s release of UK GDP data, which came in below expectations, with the month-on-month figure slipping into negative territory at -0.1%. Though marginal, this dip reinforced the narrative that the UK economy continues to lag behind its U.S. counterpart, causing further declines in GBP/USD.
Looking ahead, next week is expected to be relatively quiet until Friday. The most significant event will be on Wednesday, with the UK’s CPI release—a potential flashpoint for further GBP weakness. Friday’s schedule will feature a series of retail sales figures from the UK and Purchasing Managers’ Index (PMI) data from the UK, U.S., and Eurozone. However, given current trends, it seems likely that USD strength will persist into the coming week, potentially putting additional pressure on the Pound.
