GBP/USD Exchange Rate Relinquishes Ground as US JOLTs Jobs Openings Impress
(Updated: 15:30, 04/01/23) The Pound US Dollar exchange rate continues to trade positively at just over $1.20 this afternoon, but with the pairing’s gains more modest than they were this morning.
The US Dollar has managed to claw back some of its losses following today’s US data. The latest JOLTs release reported a far more modest decline in the number of job openings offered in November.
These figures reinforce the picture of a tight US labour market, which is helping to fuel Federal Reserve rate hike bets ahead of the release of the FOMC minutes later this afternoon.
Meanwhile a speech by Prime Minister Rishi Sunak is little discernible impact on the Pound this afternoon despite his pledges to half inflation and grow the economy in 2023.
As your Prime Minister you need to know what my focus will be, so you can hold me to account directly on whether it is delivered.
These are my five promises 👇 pic.twitter.com/XyXrlMshdG
— Rishi Sunak (@RishiSunak) January 4, 2023
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Pound US Dollar Exchange Rate Rallies amid Risk-On Flows
The Pound US Dollar (GBP/USD) exchange rate is off to a stellar start this morning. A clear risk-on mood helping to prop up the pairing.
At the time of writing the GBP/USD exchange rate is trading at around $1.2072. Up around 0.9% from this morning’s opening levels.
US Dollar (USD) Tumbles in Risk-On Trade
The US Dollar (USD) has come under heavy selling pressure this morning. The USD selling bias is being driven by a prevailing risk-on mood.
Markets appear broadly upbeat this morning, with most indexes in the green at the start of the European trading session. European shares have now risen for the third consecutive day.
A modest decline in US Treasury yields is also exerting some pressure on the ‘Greenback’ this morning.
The US Dollar got off to a roaring start this year. Climbing over 1% against most of its peers in 2023’s first day of trade. However, today’s selloff has seen the ‘Greenback’ shed most of these gains. The Pound US Dollar exchange rate is now trading close to this week’s opening levels.
Pound (GBP) Struggles to Find Own Momentum
While it is rallying against the US Dollar, the Pound (GBP) is struggling to find momentum against its other peers so far this morning.
The prospect of more disrupt industrial action in 2023 is weighing on Sterling sentiment this morning. Markets are particularly concerned by the threat of coordinated strikes from unions placing even more strain on the UK economy.
GBP investors also appear cautious ahead of Prime Minister Rishi Sunak’s first major policy speech of 2023. Sunak’s speech is expected to touch on his vision for the UK, and how he will give people ‘peace of mind’.
However, investors hoping for more concrete plans on how the PM will address the UK’s economic headwinds may be left disappointed. Reports suggest Sunak’s speech will primarily be focused on educational reform.
Pound US Dollar Exchange Rate Forecast: All Eyes on FOMC Minutes
Still to come today is the release of the minutes from the Federal Reserve’s December policy meeting. The FOMC minutes are likely to dominate movement in the Pound US Dollar exchange rate later this evening.
USD investors will look to the minutes to assess whether there is a notable divergence between the hawks and dovish regarding the raising of the Fed’s terminal rate. If policymakers seem broadly receptive to US interest rates peaking at a higher level than previously forecast then the US Dollar could surge.
In the meantime, the publication of the latest ISM manufacturing PMI could drag on USD exchange rates this afternoon. The index is forecast to a contraction in the US factory sector deepened in December.
The Pound, meanwhile, could find additional support on Thursday as the UK’s finalised services PMI is expected to confirm the vital service sector avoided a contraction last month.