Pound US Dollar (GBP/USD) Exchange Rate Dips Post US Retail Data

Pound US Dollar (GBP/USD) Exchange Rate Dips Post US Retail Data

(Article updated: 16:38, 16/5/23) The Pound US Dollar (GBP/USD) exchange rate is falling this afternoon, following the release of the latest US retail data.

While US retail sales in April printed below forecasts of 0.8%, the increase of 0.4% still marked a recovery in the vital sector. Furthermore, the data pointed to a steady uptick in consumer spending early in the second quarter.

Elsewhere, continued deliberations over the US debt ceiling may have prompted anxiety amongst traders. With risk-aversion at elevated levels, the ‘Greenback’ may be enjoying safe-haven flows.

At the time of writing, GBP/USD is trading at around US$1.2484, a drop over just over 0.3% from today’s opening rates.

Original article continues below:

Pound US Dollar Exchange Rate Muted amid Downbeat Labour Data

The Pound US Dollar exchange rate is trapped in narrow boundaries this morning, following a disappointing set of UK labour data.

At the time of writing, GBP/USD is trading at around US$1.2532, showing little movement from today’s opening rates.

Pound (GBP) Undermined by Downbeat Labour Data

The Pound (GBP) is seeing muted trade this morning, as unemployment unexpectedly rose in March. Printing at 3.9%, up from 3.8%, the figure indicates a cooling labour market.

Wage growth remains contentious. Average earnings including bonuses held at 5.8%, while excluding bonuses grew to 6.7%. As the Bank of England (BoE) had previously pointed to wage growth as an inflationary pressure, the prints may have sparked minor bets.

Economists are broadly less convinced of a tangible impact, however. With wage growth data largely remaining the same, and falling below forecasts, they likely indicate signs of a cooldown.

James Smith, Developed Markets Economist at ING, explained:

‘It’s going to take time for wage growth to slow and that hiring issues will remain a medium-term economic challenge. But from the BoE’s perspective, today’s report was the first big data test ahead of the June meeting, and there’s nothing here that screams a need for further hikes.’

US Dollar (USD) Struggles Ahead of Key Debt Limit Talks

The US Dollar (USD) is struggling for support this morning, as investors await further news on debt limit negotiations.

This afternoon, US President Joe Biden is due to meet with Republican House of Representatives Speaker Kevin McCarthy and other congressional leaders. They are expected to continue negotiating on terms to increase the debt limit.

Francesco Pesole, FX Strategist at ING, commented:

‘While Biden expressed some optimism during the weekend, McCarthy said yesterday that the two sides were still far apart after staff-level talks. He also said that a deal should probably be reached by the end of this week to have a realistic timeline to pass it in both houses.’

While jitters may be keeping a lid on USD, they may also be supporting the currency. As a safe-haven currency, the ‘Greenback’ may be being cushioned by bearish trade.

GBP/USD Exchange Rate Forecast: US Retail Recovery to Boost USD?

This afternoon, the latest retail sales data for the US is due to print. Economists are currently forecasting a rise of 0.8% on a monthly basis.

If sales have recovered to the expected extent, USD may rally amid signs of life in the vital retail sector.

Furthermore, a series of Federal Reserve officials are scheduled to speak over this evening and tomorrow. If they take hawkish stances, USD could strengthen further on elevated rate hike bets.

Looking ahead for the Pound, BoE Governor Andrew Bailey is scheduled to speak tomorrow morning. If he strikes a hawkish note, GBP could rally on increased rate hike bets.

However, if he continues to reaffirm his previous comments, Sterling could weaken. Governor Bailey previously stated that inflation was forecast to fall sharply in April, and may choose to reiterate this sentiment.

John Mulcahey

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