GBP/USD Exchange Rate Sinks as SMMT Warns of Loss of 90,000 Jobs in UK Car Industry
The Pound US Dollar exchange rate dipped today following reports that the UK car industry could lose 90,000 job losses, according to the Society of Motor Manufacturers and Traders (SMMT). The pairing is currently fluctuating around $1.38.
Sterling suffered today from growing concerns over rising levels of unemployment throughout the UK.
Mike Hawes, the CEO at SMMT, commented:
‘The next few years represent a critical period for the sector. The pace of technological change is accelerating and the competition more ferocious.
‘If we are to secure vehicle manufacturing in this country, with all the benefits to society that it brings, decisions need to be made today. The automotive sector is uniquely placed to help this government deliver on its agenda; to level up, deliver net zero and trade globally.’
In addition to worries over rising unemployment, UK house price inflation has hit 13.4% in June – its highest level since 2004 – but the outlook remains uncertain.
Robert Gardner, Nationwide’s chief economist, said that ‘underlying demand is likely to soften around the turn of the year if unemployment rises as most analysts expect, as government support schemes wind down.’
However, some Pound investors are becoming more hopeful about the lifting of lockdown restrictions on July 19.
The UK’s new Health Secretary, Sajid Javid, expressed a degree of confidence in the easing of lockdown measures next month, adding that these would be irreversible.
As a result, we could see Sterling quickly claw back its losses this week if Downing Street continues to reiterate its plans to reopen the economy in July.
US Dollar (USD) Exchange Rate Edges Higher on Souring Risk Sentiment
The US Dollar (USD) rose today largely because of souring risk sentiment as Covid-19 infection rates rise in Asia-Pacific and Australia.
As a result, risk-off market mood has driven-up demand for the safe-haven ‘Greenback’ today.
US 10-year Treasury yields fell to 1.47% from Friday’s highs of 1.54%. This had little effect on the US Dollar, however, with yields expected to rise as investors focus on key US employment data due for release this week.
Vicky McKeever, a reporter at CNBC, explains:
‘Investors will be keeping a close eye on jobs data, to see if any significant changes prompt the Federal Reserve to consider tightening monetary policy sooner than expected.’
US Dollar traders will be eyeing today’s publication of the latest US consumer confidence gauge for June.
Any improvement in the outlook for the US economy could further bolster the US Dollar Pound exchange rate.
Today will also see the release of the latest US housing price index for April. If this shows any significant improvement, then we could see the ‘Greenback’ head higher.
Pound US Dollar (GBP/USD) Exchange Rate Forecast: Could Rising US Unemployment Drag Down the ‘Greenback’?
US Dollar (USD) traders are awaiting tomorrow’s publication of the latest US ADP employment change figure for June.
Any indications of rising levels of unemployment in the US would drag down the USD/GBP exchange rate.
In addition, rising unemployment could push the Federal Reserve’s hand to further tighten monetary policy.
Tomorrow will also see the release of the UK’s final GDP figure for the first quarter. Any signs that the UK economy had performed better-than-expected would be GBP-positive.
We could see the Pound US Dollar exchange rate head higher this week, however, if Downing Street maintains and reiterates its goal to lift lockdown restrictions next month.