GBP/USD drops more than 300 pips, worst week in a year

The pound was among the worst performers in the market during the week and GBP/USD suffered the biggest weekly decline in a year. 

The pair lost more than 300 pips during the week. The main driver was Pound’s weakness but it was also affected by a stronger US dollar. 

Regarding the pound, political uncertainty in the UK climbed after PM May’s speech at the Tory party conference. Also, the political environment increases the fears about Brexit negotiations. Adding to Pound’s weakens, economic data from the UK released during the week showed numbers below expectations (manufacturing and construction PMI). 

The economic calendar looks light for next week, with industrial and construction data and the NIESR GDP Q3 estimate to be released on Tuesday.

USD supported by yields

The greenback rallied on Friday after the NFP report but then trimmed gains. Despite the negative headline in payrolls, hourly earning and the unemployment rate showed upbeat numbers and pushed the odds of a December rate hike from the Fed to the upside. The latest comments from FOMC members signaled that another rate hike before year-end was likely.

Next week, the minutes of the latest FOMC meeting will be released and the key data will be inflation figures for September. 

GBP/USD sharp slide

The pair opened on Monday at 1.3370 and on Friday bottomed at 1.3026, the lowest in a month. Near the end of the week, it was hovering around 1.3050, consolidating a weekly loss of 2.40%. Cable dropped back toward the 20-week moving average that offered support at 1.3030/40. 

The pound posted the third weekly loss in-a-row as it continues to retreat after topping at 1.3656 back on September 20. Since then it has been moving with a bearish bias.