Pound US Dollar Exchange Rate Edges Back from Monthly Best as UK Jobs Report Mixed

Pound US Dollar Exchange Rate’s Latest Surge Slows after UK Job Market Report 

Amid continued weakness in the US Dollar (USD), the Pound US Dollar (GBP/USD) exchange rate surged higher yesterday. Today’s movement has been more mixed, as markets digest the latest UK job market report. 

Last week saw the Pound (GBP) benefitting from US Dollar weakness as GBP/USD rebounded from 1.3707 to 1.3836 throughout the week, a gain of over a cent. 

Yesterday alone though, GBP/USD saw another surge in demand that took it briefly above the key level of 1.40. GBP/USD touched on a monthly high of 1.4007 this morning before slipping slightly, and at the time of writing is trending in the region of 1.3979. 

Pound (GBP) Exchange Rates Mixed as Markets Digest UK Job Market Report 

Today saw the publication of Britain’s latest job market report. As expected, it continued to show signs of recovery and resilience, with the unemployment rate improving to 4.9%. 

This improvement in unemployment was partially due to some workers dropping out of the job market amid the pandemic however, which weighed on Sterling’s appeal. 

The data also showed a contraction in new jobs, as well as mixed wage rate stats. 

Some economists are also urging caution that the UK government will likely need to continue its support for the job market if it is to keep recovering. 

US Dollar (USD) Exchange Rates Remain Broadly Unappealing 

Investors have been selling the US Dollar en masse in recent weeks, as speculation of a more hawkish Federal Reserve continues to unravel. 

While the US economic outlook is improving, US price pressures are not expected to rise much any time soon. This, combined with higher global economic recovery hopes, is making investors much more eager to buy higher yields than the safe haven US Dollar. 

According to Andrew Gillan, Portfolio Manager at Janus Henderson Investors: 

‘I think that people are quite comfortable … that the Dollar is likely to be weaker structurally for longer, 

And I don’t think we’ve seen enough evidence yet of that changing, even with a little bit of recent strength.’ 

Pound US Dollar (GBP/USD) Exchange Rate Could See Stronger Gains on UK Data 

With more UK data due in the coming sessions and the US Dollar expected to remain weak for now, the Pound to US Dollar exchange rate could be in for more gains. 

UK inflation rate data is due tomorrow. Retail sales and PMI projections are due later in the week and could also be highly influential. 

Strong UK inflation stats could cause Bank of England (BoE) policy speculation while strong UK retail stats would bolster market optimism about Britain’s economic resilience and recovery outlook. 

These are likely to overshadow the US economic calendar. Not much notable US news is due until next week, leaving the US Dollar driven mostly by market sentiment. 

According to Petr Krpata, Chief EMEA FX and Interest Rate Strategist at ING: 

‘We look for Sterling/Dollar to move persistently above $1.40 this quarter, while Euro-Sterling should move back to the 85 pence level. With the UK data likely to be strong this quarter – facilitated by the fast vaccination and the reopening effect – Sterling is set to find support.’ 

Overall, UK data is likely to be the focus for Pound US Dollar (GBP/USD) exchange rate investors for the remainder of the week. 

Josh Jeffery

Contact Josh Jeffery