Pound US Dollar (GBP/USD) Exchange Rate Recovers to Two-Week Highs
The Pound US Dollar (GBP/USD) exchange rate is trending upwards today as UK unemployment hit a 48-year low and wage inflation jumped, surpassing market expectations.
At time of writing, the GBP/USD exchange rate is around $1.245, up a cent from this morning’s opening levels.
Pound (GBP) Rebounds after Unemployment Levels Hit 48-Year Low
The Pound (GBP) is enjoying an upswing against the US Dollar (USD) today as the UK unemployment rate dropped to its lowest reading in 48 years, beating market expectations in the process. For the first time since records began, there are fewer unemployed people than vacancies.
Perhaps further boosting Sterling was wage inflation data, which beat forecasts and jumped to 7% on a yearly basis, comfortably surpassing the expected 5.4%. However, bonuses and signing-on fees skew the figure somewhat, as most workers endured a fifth consecutive month of falling living standards.
Despite the ongoing Northern Ireland protocol situation, the Pound seems to be ignoring the potential fallout of a possible trade war. Although Liz Truss will present plans to scrap parts of the protocol, analysts believe this is negotiating move rather than a serious threat.
US Dollar (USD) Remains on the Back Foot amid Improving Market Mood
The US Dollar is trending down against most of its peers today due to a much-improved market mood, with investors shying away from safe-haven currencies thanks in part due to the improving situation in China.
The city of Shanghai reported that it had achieved zero Covid infections throughout its districts, with plans to start easing its restrictions from 21 May, and total lifting of lockdown by 1 June.
But with the Ukraine crisis not abating any time soon, and its ongoing impact on soaring energy prices and the cost of living, the ‘Greenback’ could see an upside. Combined with the uncertainty surrounding China’s plans on dealing with its latest Covid outbreak, and its subsequent recovery, these worries could also lend assistance to the US Dollar.
Pound US Dollar Exchange Rate Forecast: Soaring Inflation and Hawkish Fed to Cap Gains?
With several key data sets due out this week, GBP/USD could see further swings in movement.
The latest US retail sales report is due out today, with market forecasts expecting sales to be up by 0.9% over the month of April, potentially boosting the US Dollar against the Pound.
Federal Reserve Chair Jerome Powell is set to make an appearance at an event organised by the Wall Street Journal later today. Investors will be keeping a keen eye on the speech, with any further comments on monetary policy likely to inspire further movement for the ‘Greenback’.
Elsewhere, the UK inflation rate is set to climb over 9% for the first time in 40 years, highlighting the worsening cost-of-living crisis. And with the Ukraine situation not improving, Sterling could encounter some headwinds moving forward.