Pound US Dollar (GBP/USD) Wavers Higher as Markets Digest Data
(Updated 15:20, 17/08/23) The Pound US Dollar (GBP/USD) exchange rate has fluctuated higher today, with Pound Sterling (GBP) being underpinned by Bank of England (BoE) interest rate hike expectations.
Recent UK reports have boosted bets on more policy tightening from the BoE. With wage growth rising to a record high and core inflation proving persistently sticky, the British central bank may opt to hike rates higher. This lent the Pound support through today’s session.
However, a lack of economic data and a shifting market mood injected some volatility into GBP/USD. After a short, sharp drop this morning, the pairing then moved higher to touch $1.2787, its highest level in a week.
The upside came amid the latest US initial jobless claims figure. Printing broadly in line with expectations, the data showed that new unemployment claims hit 239,000 last week. Though this was a drop on the previous week and is historically low, it is well above the levels seen in July, possibly indicating a softening labour market.
Since hitting a one-week high, the GBP/USD exchange rate has now pulled back. At the time of writing, the Pound US Dollar pair is trading at $1.2755, up 0.3% from the start of the European session.
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Pound US Dollar (GBP/USD) Exchange Rate Regains Ground amid BoE and Fed Speculation
The Pound US Dollar (GBP/USD) exchange rate is ticking higher this morning, recouping some of the ground ceded through the second part of yesterday’s session, as markets continue to bet on more interest rate rises from the Bank of England (BoE).
At the time of writing, GBP/USD is trading at around $1.2737, up a modest 0.2% from a low hit earlier this morning.
Pound (GBP) Firms on BoE Rate Hike Bets
The Pound (GBP) is moving higher this morning as investors anticipate more rate hikes from the BoE in the wake of recent British economic data.
Yesterday, the UK’s latest consumer price index showed that underlying inflation remains persistently sticky. Although headline inflation eased sharply in July, from 7.9% to 6.8%, core inflation unexpectedly held steady at 6.9%, rather than dropping to 6.8%.
Furthermore, services inflation – which is closely watched by Threadneedle Street – ticked up from 7.2% to 7.4%.
The data came hot on the heels of the UK’s jobs report earlier this week, which revealed that wage growth unexpectedly jumped to a record high of 7.8% in June.
Today, investors are digesting this data, with the prospect of more BoE hikes lending Sterling support.
US Dollar (USD) Trims Fed-Inspired Gains
Meanwhile, the US Dollar (USD) is giving up the ground it won yesterday evening after the publication of the Federal Reserve’s latest meeting minutes.
The minutes from the US central bank’s last policy decision struck a fairly hawkish tone, with policymakers worried about upside risks to inflation due to a tight labour market and a resilient economy.
This lifted the US Dollar last night, but the ‘Greenback’ was unable to sustain the upside as European trade began.
Furthermore, an anxious market mood is failing to lift the safe-haven US Dollar against the Pound. However, these factors could be limiting USD’s losses.
GBP/USD Exchange Rate Forecast: US Jobless Claims in Focus
Looking ahead, the only data of note today is the latest initial jobless claims figure from the US.
Markets expect new unemployment claims to have dropped marginally last week, from 248,000 to 240,000. A decline could suggest ongoing tightness in the labour market, which may lend USD some support.
However, the previous week’s figures printed higher than expected, indicating that the US jobs market may be softening. If this week’s results exceed forecasts again, a subsequent pullback in Fed rate hike bets could dent USD.
Until then, risk appetite could impact the currency pairing. The current downbeat mood could see investors favour the safe-haven US Dollar over the riskier Pound, thereby applying some pressure to GBP/USD.