Pound US Dollar Exchange Rate News: GBP/USD Quiet amid Cooling UK Labour Market

Pound US Dollar Exchange Rate Rangebound as BoE Rate Hike Nears Peak

The Pound US Dollar (GBP/USD) exchange rate is trading narrowly as a cooling UK labour market pares rate hike bets further.

At time of writing the GBP/USD exchange rate is trading around $1.2476, relatively unchanged from this morning’s opening levels.

Pound (GBP) Undermined by Loosening Labour Market

The Pound (GBP) continues to struggle for demand as a lack of data leaves it vulnerable to the relentless downward pressures of the flagging economy.

The Recruitment and Employment Confederation (REC) published their latest survey which revealed the UK labour market to be cooling. Despite wage growth continuing to climb, the demand for staff declined at the fastest pace since the height of the pandemic. With fears growing around the fragility of the UK, firms are anxious over the outlook. Neil Carberry, REC Chief Executive, said of the data:

‘August is always a slower month for new permanent roles, but this has been exacerbated in 2023 by the lack of confidence to start the new hiring we saw among firms in the Spring.’

‘As inflation begins to drop, it is likely that firms will return to the market later in the year – employer surveys suggest confidence may be returning. But for now, the labour market has more slack than it has since the heights of the first lockdown.’

With interest rate hike bets already severely pared in the wake of Bank of England (BoE) Governor Andrew Bailey’s speech, Sterling is struggling. He said that with inflation showing a marked downturn, interest rates will not necessarily need to go much higher. GBP investors are now expecting the central bank to be near the terminal rate peak, souring demand for the Pound.

US Dollar (USD) Supported by Souring Market Mood

The US Dollar (USD) is remaining fairly quiet this morning as a decline in Treasury yields ended the three-day winning streak of a resurgent ‘Greenback’.

However, with rising US China tensions once more, market mood could be souring, boosting safe-haven flows for the US Dollar. Beijing announced today that it will ban iPhones in all government agencies. Bloomberg reported that the ban could also extend to all state-owned enterprises. This would amount to a significant dent in Apple sales, much to the chagrin of the US.

Geopolitical tensions are weighing on risk sentiment once more, and US Secretary of State Antony Blinken added fuel to the fire earlier this week. He said that the US will not make any changes to the tariffs imposed on China until the Treasury has completed its review.

Pound US Dollar Forecast: UK Labour Market Data to Soften the Pound Further?

Looking ahead to next week, the Pound US Dollar exchange rate could see more trouble with the latest employment data. A predicted uptick in the jobless rate could be met with a slowing of wage growth. If forecasts are true, Sterling could slide on a cooling labour market.

Meanwhile, a relatively quiet start of the week for the US Dollar could mean its left to trade on market sentiment. Further proof that global growth is slowing could weigh on risk appetite, and the safe-haven ‘Greenback’ could climb.

Danny Tingle

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