Pound Sterling US Dollar (GBP/USD) Exchange Rate Buoyed as UK Unemployment Slides to 4%

GBP/USD Rallies on Better-than-expected Unemployment and Further US-China Tensions

UPDATE: The Pound US Dollar (GBP/USD) exchange rate has shot up this morning, likely on the back of the better-than-expected UK data, and is currently trading at inter-bank rates of $1.2909.

ILO unemployment data showed that unemployment dropped in November to 4% from the previous 4.1%, and average earnings including bonuses rose to 3.4%, despite the forecast suggesting this figure would remain steady.

US-China trade tensions remain in the spotlight due to the signal that China’s economy has slowed, with President Trump stating in a tweet:

‘Makes so much sense for China to finally do a Real Deal, and stop playing around!’

China is now warning the US that they will take action against them if they continue with their plans to demand the extradition of Huawei Chief Financial Officer, Meng Wanzhou.

Hua Chunying, Chinese Foreign Ministry spokeswoman has stated:

‘China will take action in response to measures taken by the US. Everyone has to be held responsible for their own actions. Both US and Canada should be aware of the seriousness of the case and take steps to rectify the mistake.’

GBP/USD Slips Further as Weakest House Price Increase Since 2012

The Pound Sterling US Dollar (GBP/USD) exchange rate has fallen over the course of the morning, despite trade being subdued as US markets remain closed for Martin Luther King Jr. Day.

The pairing is currently trading at an inter-bank rate of $1.2857.

This morning, Rightmove released their UK house price report for January 2019, showing that asking prices rose at the slowest pace since 2012, which is likely a result of anxieties over Britain’s departure from the European Union scheduled this year.

Likely aiding US Dollar strength, data from China earlier showed that the economy has grown at its slowest pace since 1990, further increasing fears over a global slowdown, which could have buoyed the safe-haven USD.

GBP/USD Exchange Rate Slides on back of Worse-than-Expected UK Retail Sales

Friday saw the release of some worse-than-expected British retail sales figures for December.

The weak data was blamed on shoppers bargain hunting during the Black Friday sales, likely pulling forward their spending to November.

ONS, Head of Retail Sales, Rhian Murphy commented:

‘Retail sales fell back slightly in the last three months of 2018 with only petrol stations seeing significant growth.’

This also reconfirmed that consumer confidence in the run-up to Brexit is weakening, which likely caused sentiment for the UK currency to be dampened.

Sterling (GBP) Slides Despite Poor US Consumer Sentiment

As the US government continues to experience a partial shutdown, there has been a lack of US data releases to aid USD direction, although better-than-expected industrial production figures released on Friday afternoon aided the US Dollar.

US industrial production decreased to 0.3% in December, despite the forecast suggesting this figure would reveal slower growth.

The Michigan Consumer Sentiment Index for January slipped from 98.3 to 90.7, although this bearish reading did little to hinder the US Dollar from continuing to make gains on Sterling.

US-China tensions appeared to cool further over this weekend ahead of Chinese Vice Premier Liu He’s trip to Washington planned for the end of the month, with US President, Donald Trump stating:

‘If we make a deal, certainly we would not have sanctions and if we don’t make a deal, we will. It’s going well. I would say about as well as it could possibly go.’

GBP/USD Outlook: Will Brexit Anxieties Increase after PM presents ‘Plan B’?

With the lack of UK data releases today GBP/USD is likely to hinge on the Prime Minister, Theresa May, who is due to present her Brexit ‘Plan B’ to Parliament this afternoon.

Mrs May has promised that she will consult with senior MPs in both major political parties, although there is some resistance from Labour leader, Jeremy Corbyn, who refuses to speak to her unless she rules out a no-deal Brexit.

There is also a lack of US data releases as a result of today being MLK Day, and the US government shutdown continuing, so if the US-China tensions continue to cool and the two powers are able to reach a deal it seems likely that the Pound US Dollar (GBP/USD) exchange rate will rise as risk sentiment  decreases and investors pull out of the safe-haven currency.

Hannah Wilson

Contact Hannah Wilson