Anna 
As the British Pound enters the new trading week on a stronger note against the US Dollar, the focus is expected to remain predominantly driven by developments on the US side of the GBP/USD pair.
The week ahead will feature the Federal Reserve’s monetary policy decision for May, a critical event for traders and economists alike. Additionally, key labor market statistics from the US will be released, further shaping market sentiment. In contrast, the economic calendar in the United Kingdom remains sparse, likely directing more attention towards the USD aspect of GBP/USD trading.
Market expectations anticipate the Fed to maintain current high borrowing costs as part of its inflation-fighting strategy. This stance is likely to keep the US Dollar firm, driven by the belief that other major central banks might follow suit or make rate adjustments shortly after the Fed. This repricing dynamic has contributed significantly to the Pound’s weakness against the Dollar this year.
Despite the USD’s recent weakening against a basket of currencies, including the Pound, Sterling has benefited from positive economic indicators in the UK. Notably, inflation pressures have eased, and the London stock market has mirrored global gains, supporting Pound strength.
The release of May’s nonfarm payrolls data from the US on May 3 is expected to be a key market event for the week. Strong data indicating continued economic resilience could further delay expectations of rate cuts, exerting additional upward pressure on the Dollar. Conversely, a substantial downside surprise would be required to accelerate rate-cut predictions.
Given the likely scenario of continued USD strength driven by the expectation of ‘higher for longer’ interest rates in the US, the forecast leans bearish for the Pound against the Dollar this week. Additionally, after a robust rally, the Pound may naturally retreat from recent gains, adding further downward pressure in the near term.
