Pound US Dollar (GBP/USD) Exchange Rate Plummets after Upbeat US Jobs Data
(Updated 16:41 05/01/2023)
The Pound US Dollar (GBP/USD) exchange rate tumbled as the day went on. The currency pair saw drastic losses after upbeat US jobs data pointed to a tight labour market and added fuel to expectations of further interest rate hikes from the Federal Reserve.
US private sector payrolls added more jobs than expected in December. Additionally, jobless claims fell by 190000 compared to the week before. The data releases come after the latest FOMC minutes on Wednesday signaled the Fed’s commitment to curbing soaring inflation. The hawkish hints likely added to GBP/USD’s losses today.
Stuart Hoffman, senior economic advisor at PNC Financial, said:
‘Fed officials are expecting a slowing in the job market given the big increase in interest rates last year. Right now the labor market is too tight for the Fed, and job growth is too strong.’
At time of writing the GBP/USD exchange rate was at around $1.1896, which was down roughly 1.3% from this morning’s opening figures.
Original article continues below:
Pound US Dollar (GBP/USD) Exchange Rate Slips amid Downbeat Forecasts for UK Businesses
The Pound US Dollar (GBP/USD) exchange rate is falling today. A risk-off impulse as well some downbeat signs for UK businesses may be prompting losses in the currency pair.
On the other hand, dovish signals from the Federal Reserve could be limiting losses for GBP/USD.
At time of writing the GBP/USD exchange rate is at around $1.2025, which is down roughly 0.3% from this morning’s opening figures.
Pound (GBP) Drops as Final Services PMI Revised Lower
The Pound (GBP) is slipping today. A risk-off impulse may be weighing on GBP. Signs of persistent strength in the UK services sector may be limiting drastic losses for Sterling, however.
UK businesses Greggs, Next, and B&M all reported a sharp rise in profits over the festive period. The profits defied the downbeat outlook for the UK’s retail sector amid the UK’s cost-of-living crisis.
The profits contrast with the more pessimistic assessment from the British Chambers of Commerce (BCC) which may be weighing on the Pound. The BCC’s quarterly survey pointed to rising expectations of lower profits in 2023 and higher costs.
A slight downward revision in the final reading of December’s service sector PMI may also be pulling Sterling lower today. The PMI was revised lower to print a contraction in the sector versus the expected return to growth.
US Dollar (USD) Firms as Fed Minutes Point to Further Rate Hikes at Slower Pace
The US Dollar (USD) is edging higher against many of its peers today. A risk-off impulse in the markets could be underpinning the safe-haven ‘Greenback’ today.
USD’s gains are likely being capped by dovish signals from the Federal Reserve, however. The latest minutes from the FOMC indicated that Fed policymakers now favoured a slower pace of policy tightening.
The minutes also outlined that the central bank would remain flexible in its approach to interest rate hikes, signalling that it would continue to hike rates if necessary.
Political instability in the US could also be keeping pressure on the US Dollar today. Republicans in the House of Representatives have failed to elect a leader for the second straight day.
GBP/USD Exchange Rate Forecast: Will Rail Strikes Keep Pressure on Pound?
The Pound is set to see no other significant data over the rest of the week. Looking to other releases, the latest house price data on Friday could bolster the Pound. December’s house price index is forecast to recover amid other signs of a downturn in the sector.
On the other hand, the latest industrial action in the UK could keep pressure on GBP.
For the US Dollar, employment change figures later today could pull USD lower if they print as forecast. December’s data is expected to remain close to the previous month’s figures and point to a cooler labour market.
Also today, a forecast narrowing in the US’ trade deficit could lend support to the US Dollar if the figures print as forecast. On the other hand, the final reading of December’s service sector PMI could weigh on the currency if the figures confirm a contraction.
On Friday, key employment data could boost the US Dollar if the releases continue to indicate a tight labour market. December’s non farm payrolls and unemployment rate are expected to print within the narrow range they’ve inhabited for the past few months.
Finally for USD, a predicted second consecutive month of expansion in the US’ private sectors as seen in the ISN non-manufacturing PMI could boost the US Dollar.