Pound US Dollar (GBP/USD) Exchange Rate Slides Further on Hot US Labour Data
(Article updated 16:44, 2/3/2023) The Pound US Dollar (GBP/USD) exchange rate has continued to fall this afternoon, after the publication of the latest US jobless claims.
Data for the week ending 25th showed that jobless claims had fallen to 190,000. As such, the labour market was seen to remain within the usual narrow boundaries, increasing rate hike bets amongst USD investors.
As the labour market can be seen as a key driver of inflation, the fall put more pressure on the Federal Reserve. With higher interest rates, economic demand will lower, helping inflation to cool.
At the time of writing, GBP/USD is trading around US$1.1943, a fall of roughly 0.7% from the morning’s opening rates.
Original article continues below:
Pound US Dollar (GBP/USD) Exchange Rate Slips as Hawkish Fed Bets Rise
The Pound US Dollar (GBP/USD) exchange rate is falling this morning, as USD investors continue to bet on a hawkish Federal Reserve.
At the time of writing, GBP/USD is trading around US£1.1984, a decline of roughly 0.4% from the morning’s opening rates.
US Dollar (USD) Firms on Hawkish Fed Bets
The US Dollar (USD) is posting small gains this morning, as USD investors continue to bet on Federal Reserve rate hikes.
This morning, US Treasury bond yields have surged, which are a usual barometer of investor rate hike bets. The 10-year Treasury yields are above 4%, as investors await US labour market data this afternoon.
Currently, investors are now pricing in a one-in-three chance that the Fed could hike rates by 50bps in March. They’re also leaning towards a peak of 5.5%-5.7% for interest rates.
Furthermore, a mixed market mood is likely bringing some safe-haven flows to the ‘Greenback’. With the expectation of a hawkish Fed, the fears of how much of a recession they could instigate is weighing on global growth anxieties.
Pound (GBP) Undermined by Further Housing Market Slump
The Pound (GBP) is seeing mixed trade this morning, as further news of downturn in the UK’s housing market caps Sterling.
One of the UK’s largest housebuilders, Taylor Wimpey, reported this morning that it’s sales rate had fallen. Now at 0.62 homes per outlet per week, the firm pointed to economic uncertainty as the root cause.
Their report stated:
‘While it is encouraging to see an uptick in sales and ongoing robust customer interest in our homes, as previously announced, our reservation rate is significantly lower than in recent years as affordability concerns weigh.’
Further limiting Sterling’s appeal may be a pare back in Bank of England (BoE) rate hike bets. Following yesterday’s dovish speech from BoE Governor Andrew Bailey, investors enacted a sell-off which Sterling is yet to fully recover from.
Pound US Dollar (GBP/USD) Exchange Rate Forecast: US Services PMI to Weigh on USD?
Looking ahead for the US Dollar, the core catalyst of movement is likely to be tomorrow’s ISM non-manufacturing PMI release. February’s index is forecast to print at 54.5, falling from 55.2.
If this prints accurately, the sign of slowdown in the US’ service sector could weigh on the ‘Greenback’. It may lead to USD investors paring back their rate hike bets from the Federal Reserve.
For the Pound, data releases are scarce beyond Bank of England (BoE) Chief Economist Huw Pill’s speech this afternoon. After BoE Governor Andrew Bailey’s speech yesterday, GBP investors will be hopeful of a hawkish stance.
If Pill does take this stance, Sterling could gain support. However, it seems unlikely that he will call for further rate hikes after Bailey’s speech.