Pound US Dollar (GBP/USD) Exchange Rate Nosedives as US Non Farm Payrolls Come In Hot
(Updated 13: , 03/02/2023) The Pound US Dollar exchange rate has fallen off a cliff this afternoon, as the US non farm payrolls data pointed to a surprise increase in jobs created.
Printing at 517,000 over a forecast of 185,000, the data pointed to a red-hot labour market. Furthermore, wage growth was shown to have fallen in January. With the data combined, investors appear to be growing hopeful that the Federal Reserve will continue with their cycle of tightening.
While the ‘Greenback’ is soaring, Sterling was also able to gain ground against most other peers today as the final services index printed above forecast. As such, the slowed rate of contraction brought cheer to GBP investors and allowed it to recover some losses.
At the time of writing, GBP/USD is trading around US$1.2132, a fall of roughly 0.7% from the morning’s opening rates.
Original article continues below:
Pound US Dollar (GBP/USD) Exchange Rate Rangebound as GBP Investors Digest BoE Hike
The Pound US Dollar (GBP/USD) exchange rate is trading narrowly this morning, as investors continue to mull yesterday’s rate hike from the Bank of England (BoE).
At the time of writing, GBP/USD is trading around US$1.2214, showing little movement from the morning’s opening rates.
Pound (GBP) Stumbles amid Rate Hike Hangover
The Pound is lacking support this morning, as investors continue to digest the Bank of England’s recent rate hike.
The BoE accompanied the bumper, though expected, 50bps hike with a shift in communication. While the Monetary Policy Committee (MPC) voting remained the same, the BoE took a more dovish angle.
BoE Governor Andrew Bailey altered his language to imply that the current rate hiking cycle was nearing an end.
James Lynch, Fixed Income Investment Manager at Egon Asset Management, stated:
‘The real story is that it looks like we are at the end of the rate hike cycle. The BoE have dropped language for ‘forceful’ hikes in favour of saying that ‘if there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required.’
Elsewhere, industrial action is continuing across the UK, with transportation workers striking. This follows the largest coordinated strike action in UK history earlier in the week. Because of this volatile environment, sentiment towards Sterling may be being sapped.
US Dollar (USD) Shores Up Ahead of Non Farm Payroll Data
The US Dollar is firming this morning against most major peers, as investors anticipate the latest non farm payroll data.
Due to print in the afternoon, the number of jobs created in January is forecast to print at 185,000. With this fall, it may show the tight US labour market beginning to cool. Similarly, investors are keeping a keen eye on the accompanying wage growth data.
As highlighted by Francesco Pesole, FX Strategist at ING, who states:
‘Any evidence that wage growth is losing pace and/or that hiring is slowing down materially would likely fuel rate cut expectations further.’
Elsewhere, a tepid mood may be lending further tailwinds for the safe-haven currency, as investors shy away from riskier assets.
Pound US Dollar (GBP/USD) Exchange Rate Forecast: Calmer Week to Boost USD?
Looking ahead to next week for the US Dollar, thin trade is the defining factor. Beyond Tuesday’s release of December’s balance of trade figures, little data is available for the ‘Greenback’.
With this data forecast to show the US’ trade deficit widen to $-68.6bn, USD rates may weaken. However, due to the quiet conditions of the week the safe-haven currency could climb on risk averse market movements.
For the Pound, the key data release comes on Friday, when the UK’s GDP data for Q4 and December is expected. The quarterly growth rate is forecast to rise from -0.3% to 0%, reflecting a stalled economy.
Meanwhile, the monthly rate is expected to show that the UK’s economy contracted to -0.1% from 0.1% between November to December.
As such, Sterling may not see much support as the UK economic outlook continues to remain downbeat.