Pound US Dollar (GBP/USD) Exchange Rate Slides as Jobless Claims Surprise
(Updated 16:35 06/04/23)
The Pound US Dollar (GBP/USD) exchange rate is losing ground today. The pairing may be slipping after poor US jobs data.
The latest US jobless claims printed better than expected earlier today. Claims had been forecast to fall to 200,000, but instead fell to 237,750. The data indicated a cooling labour market in the US. Markets also picked up on suggestions that the Federal Reserve’s policy tightening may be having an effect.
The data prompted fears of a US recession in the markets, however. This could actually be boosting USD and prompting the losses in GBP/USD today.
At time of writing the GBP/USD exchange rate is at around $1.2437, which is down roughly 0,2% from this morning’s opening figures.
Original article continues below:
Pound US Dollar (GBP/USD) Exchange Rate Trends Sideways amongst Cautious Mood
The Pound US Dollar exchange rate is trading in a narrow range today. The pairing may be coming under pressure from a risk-off mood. Mixed Bank of England (BoE) rate hike bets could also be pressuring the pair.
On the other hand, GBP/USD may be seeing losses limited by a paring back of Federal Reserve hike bets.
At time of writing the GBP/USD exchange rate was at around $1.2463, virtually unchanged from this morning’s opening figures.
Pound (GBP) Edges Higher as UK Outlines New Brexit Import Plans
The Pound (GBP) is seeing limited upward movement today. Sterling may be finding support from Brexit-based optimism and BoE rate hike bets.
GBP investors may be finding optimism from signs that the UK is set to finalise the process of checking goods from the EU.
Speaking on the proposals, a UK government spokesperson said:
‘The Border Target Operating Model sets out a new model for importing goods into the UK from countries inside and outside the EU.’
Sterling’s movements may also be influenced by mixed expectations for future BoE action. Markets have been pricing in an increased chance of a 25bps hike at the central bank’s May meeting.
Dovish comments from BoE policymaker Silvana Tenreyro on Tuesday may be dampening these bets, however. Tenreyro signalled that the central bank ‘may need to cut interest rates earlier and faster’.
US Dollar (USD) Subdued as Markets Speculate on Fed Slowdown
The US Dollar (USD) is seeing muted advances today. Any gains for safe-haven ‘Greenback’ may coming off the back of a cautious market mood.
Reduced Fed rate hike bets may be weighing on USD today. Disappointing employment change data on Wednesday prompted speculation of a cooler labour market in the US.
Speaking on the Fed’s possible forward path, director of research at Econofact Jeffrey Fuhrer said:
‘It’s time for the Fed to pause and gauge the effects of their moderately restrictive policy – or to consider reducing rates later this year, as financial market participants expect.’
The bets on a slower pace of Fed tightening may also be prompting a downturn in US Treasury bond yields today. This may be adding to any headwinds for the US Dollar.
GBP/USD Exchange Rate Forecast: Will UK Economy Contraction Dent Sterling?
The Pound is likely to see little movement over the rest of the week due to national holidays on Friday and Monday in the UK.
Looking to next week for Sterling, a forecast contraction in the UK’s economy could add to any downturn for Sterling. February’s GDP is set to fall by 0.1%.
The US Dollar could see a boost later today if jobless claims print as expected. The latest claims are expected to remain close to previous levels.
Friday’s high-impact employment data could have the opposite effect on USD. March’s non farm payrolls are expected to fall to 240,000. This cut in job openings may pull the US Dollar lower.
On the other hand, March’s unemployment rate could provide some support to USD. March’s figures are set to remain unchanged at 3.6%, close to the 50-year low of 3.5%.
Inflation data is likely to be the main driver of movement in USD next week. An expected drop in March’s core inflation on Wednesday may prompt a drop in the US Dollar.
Additionally, PPI figures on Thursday could also dent confidence in USD. March’s producer price index is expected to have remain stagnant last month.