Pound US Dollar (GBP/USD) Exchange Rate Surges as Fed Rate Hike Bets Pared
(Updated 4/8/23, 16:45)
The Pound US Dollar (GBP/USD) exchange rate is firming this afternoon as underwhelming US jobs data signalled a cooling labour market. The figures tempered rate hike bets from the Federal Reserve, which sent the ‘Gr4eenback’ spiralling.
At time of writing, the GBP/USD exchange rate is around $1.2773, a 0.47% jump from this morning’s opening levels.
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GBP/USD Exchange Rate Wavers amid Economic Stagnation Concerns
The Pound US Dollar exchange rate is trading narrowly amid mounting fears over the economic outlook for the UK.
At time of writing, the GBP/USD exchange rate is around $1.2704, relatively unchanged from this morning’s opening levels.
Pound (GBP) Undermined by Precarious UK Economy
The Pound (GBP) is still struggling for demand this morning in the wake of yesterday’s interest rate decision. With the Bank of England (BoE) raising rates to a fresh 15-year high of 5.25%, concerns are mounting over the UK economy.
Accompanying the hike, the BoE also cut its inflation and growth forecasts. Fears that surging borrowing costs will hamper the UK’s economic growth, the central bank downwardly revised its growth to an average of 0.25%. Chancellor Jeremy Hunt also warned that the UK was trapped in a ‘low-growth trap’. As the central bank continues to fight sky-high inflation, surging borrowing costs could continue to weigh on the economy, potentially seeing a stagnation this year. Christoph Siepmann, Senior Economist at Generali Investments, commented:
‘While acknowledging that GDP growth held up better that previously expected, it nevertheless revised growth down 0.5% in 2024 (from +0.75%) and to 0.25% in 2025 (from 0.75%).
‘We are still more pessimistic for this year and expect a stagnation.’
US Dollar (USD) Quiet Ahead of Crucial Jobs Market Data
Meanwhile, the US Dollar (USD) is fairly subdued this morning amid a modestly improving market mood. Investors could be moving to the sidelines ahead of the key labour market data released this afternoon.
After the Federal Reserve’s decision to raise the interest rates once more, Fed President Jerome Powell emphasised that further moves will be data-dependant. As the labour market report has long been seen as a key bellwether of the US economy, today’s release could garner more attention than usual.
Elsewhere, upbeat news out of China helped buoy spirits as Beijing announced further fiscal measures to boost economic growth in the world’s second-largest economy. With the risk-sentiment improving modestly, safe-haven flows could be stemmed, denting the ‘Greenback’.
Pound US Dollar Exchange Rate Forecast: Strong Labour Market Data to Boost the Greenback?
Looking ahead, the Pound US Dollar exchange rate could see further movement with the latest US economic data. Both unemployment and non-farm payrolls figures for the US could boost the ‘Greenback’. The jobless rate is expected to remain unchanged at 3.6%, and non-farm payrolls are expected to climb by 200k. If data prints to forecast, the US Dollar could climb on a persistently-tight labour market.
Meanwhile, comments from BoE Chief Economist Huw Pill could influence Sterling. In the wake of yesterday’s interest rate decision, Pill will be addressing the BoE’s regional agents. With the central bank for hiking the rates to a 15-year high, Pill will be justifying the decision. Any clues to how the BoE sees inflationary pressures developing, Sterling could move if a hawkish tone is struck.