GBP/USD Muted Following UK Employment Figures

GBP/USD Exchange Rate Subdued in Wake of Mixed UK Labour Report

UPDATE: The Pound Sterling to US Dollar (GBP/USD) exchange rate is stuck close to a one-week low this morning, trading at around $1.2946 following the publication of the UK’s latest employment figures.

The data revealed a mixed outlook for the UK’s labour market, with unemployment sliding to a new 44-year low at 3.8% at the same time that wage growth slowed from 3.5% to just 3.2%.

On top of this were reports that the cross-party Brexit talks are close to breaking down as Theresa May rejects Labour’s demand for a customs union with the EU, a potential outcome that is further limit the appeal of Sterling today.

GBP/USD Exchange Rate Flat as Markets Wary of China Retaliation

The Pound Sterling to US Dollar (GBP/USD) exchange rate is trading in a narrow range at the start of this week as markets remain cautious ahead of an expected Chinese response to the latest US tariffs.

At the time of writing the GBP/USD exchange rate is virtually unchanged this morning, leaving the pairing stuck at $1.30.

US Dollar (USD) Steady as Markets Await Chinese Tariff Response

The US Dollar (USD) is trading narrowly against the Pound (GBP) and the majority of its other peers as markets brace for Beijing’s retaliation to Donald Trump’s decision to hike tariffs against China.

The US raised tariffs from 10% to 25% on $200bn worth of Chinese goods on Friday in a major escalation in trade tensions after Trump accused Beijing of breaking promises made as part of ongoing trade talks between the two powers.

So far investors have refrained from flocking to the safe-haven US Dollar, with markets aware that trade talks are still ongoing and that the new tariff rates do not cover goods already in transit, giving the two sides roughly two weeks before they really impact trade.

However this could quickly change, depending on how China reacts, with a retaliation from Beijing likely to escalate things further.

Speaking to reporters in Beijing, Chinese Foreign Ministry spokesman Geng Shuang said:

‘China will never surrender to external pressure. We have the confidence and the ability to protect our lawful and legitimate rights.’

Depending on how China responds this could derail trade talks, likely propelling USD exchange rates higher as tensions continue to escalate.

Pound (GBP) Flat as Time begins to run out for Cross-Party Talks

Meanwhile the Pound (GBP) is struggling to find any momentum at the start of this week’s session as markets remain concerned by a lack of progress in cross-party Brexit talks.

After weeks of talks it looks increasingly likely that a deal between the government and Labour will not be reached, with shadow Brexit secretary Sir Keir Starmer suggesting that Theresa May still refuses to budge on a number of key issues, meaning there’s a chance that Labour walk away from talks as soon as this week.

Starmer also claimed that any joint-deal would also need to be subject to a confirmatory vote if it were to get through Parliament, an outcome that appears unlikely given Conservative opposition to a second referendum.

GBP/USD Exchange Rate Forecast: Slowing UK Wage Growth to Undermine Sterling?

Looking ahead, we may see the Pound to US Dollar (GBP/USD) exchange rate move lower tomorrow morning as the UK publishes its latest employment data.

Economists forecast the report will show that employment in the UK continued to climb in March, although not by enough to impact the unemployment rate.

However it will be the accompanying earnings figures that are likely to be the focus for GBP investors on Tuesday, with Sterling potentially weakening if wage growth began to slow again at the end of the first quarter as analysts suspect.

Meanwhile, away from further developments in the US-China trade dispute, USD investors are likely to be focused on the midweek publication of the latest US retail sales figure, where a sharp deceleration in sales growth in April is likely to dent the appeal of the US Dollar.

Matthew Andrews

Contact Matthew Andrews