Pound US Dollar Exchange Rate Strengthens amid Risk-On Mood
The Pound US Dollar (GBP/USD) exchange rate is off to a healthy start this morning. A risk-on market mood helping to underpin the pairing.
At the time of writing the GBP/USD exchange rate is trading at around $1.1853. Up around 0.9% from this morning’s opening levels.
US Dollar (USD) Softens in Upbeat Trade
The US Dollar (USD) opens today’s session on the defensive. Demand for the safe-haven currency is softening as a risk-on mood prevails.
Market risk appetite has strengthened over the past week. A scaling back of Federal Reserve rate hike expectations in the wake of a weaker-than-expected US inflation print continues to cheer investors.
The odds for another 75bps rate hike from the Fed are now below 20%. Down from nearly 70% a month ago.
Pound (GBP) Undermined by Mixed Jobs Report
While the Pound (GBP) is rallying against the US Dollar this morning, Sterling is struggling to replicate this success against its other peers. As the UK’s latest jobs report made for some mixed reading.
Data published by the Office for National Statistics (ONS) reported an unexpectedly rise in unemployment. The jobless rate climbed from 3.5% to 3.6% in September.
The surprise uptick in unemployment is feeding into UK recession concerns. Signs that more firms are stopping hiring points to a wider slowdown in economic activity.
Victoria Scholar, head of investment at Interactive Investor, comments:
‘We are beginning to see tentative signs of an economic slowdown come through in the labour market figures now with job vacancies retreating from the highs as businesses make cutbacks and reduce hiring and with the unemployment rate surpassing analysts’ expectations.’
On the other hand the accompanying earnings figures reported a surprise uptick in wage growth. Real wages climbed from 5.5% to 5.7% in September. While this has offered some support to the Pound this morning, GBP investors are all too aware that wages continue to trail well behind inflation.
The continued gulf between wages and inflation will stoke concerns over consumer spending as we head into the key holiday trading period. The threat of a deepening recession
Pound US Dollar Exchange Rate Forecast: Surge in UK Inflation to Stoke Sterling Volatility?
Likely driving movement in the Pound US Dollar exchange rate tomorrow will be the publication of the UK’s consumer price index.
October’s figures are forecast to report domestic inflation shot up from 10.1% to 10.7%. The latest rise in inflation could bolster expectations for the next BoE interest rate hike and lift the Pound in the process.
On the other hand, another spike in inflation is likely to exacerbate concerns over the UK’s cost of living crisis. Potentially injecting some volatility into the GBP/USD exchange rate amid concerns over its impact on consumer spending.
For USD investors the focus is likely to be on the latest US retail sales release. Will a strong rebound in sales growth last month help to bolster the US Dollar?