Pound US Dollar (GBP/USD) Exchange Rate Strikes Two-Month High as US Labour Data Disappoints
Article updated 16:45, 3/11/2023:
The Pound US Dollar (GBP/USD) exchange rate is soaring this afternoon, hitting a two-month high amid dismal US jobs data.
October’s non-farm payrolls data printed significantly below forecasts. This cemented the expectation that the Federal Reserve had concluded its current tightening cycle.
On the back of this, the ‘Greenback’ cratered as markets cheered the end of an aggressive tightening cycle.
At the time of writing, GBP/USD is trading at around US$1.2381, climbing by just under an astonishing 1.56% from the morning’s opening rates.
Original article continues below:
Pound US Dollar (GBP/USD) Exchange Rate Ticks Higher amid Continued BoE Speculation
The Pound US Dollar (GBP/USD) exchange rate is firming this morning, as investors weigh up the end of the Bank of England’s (BoE) tightening cycle.
At the time of writing, GBP/USD is trading at around US$1.2213, rising by just under 0.2% from the morning’s opening rates.
Pound (GBP) Rangebound as Markets Mull End of BoE Tightening Cycle
The Pound (GBP) is trading largely sideways this morning, as markets continue to mull the Bank of England’s recent decision.
Yesterday, the BoE elected to keep interest rates unchanged, leaving them at their current 15-year high of 5.25%.
While this initially wrought choppy trade for Sterling, this has now stabilised as investors consider the accompanying forward guidance. The BoE asserted that rate cuts were off the table throughout 2024, and that monetary policy needed to remain elevated for the foreseeable future.
BoE Governor Andrew Bailey stated that:
‘Our increases in interest rates are working to bring inflation back to the 2% target. So today we have voted to maintain Bank Rate at 5.25%. Inflation is still too high. We will keep interest rates high enough for long enough to make sure we get inflation all the way back to the 2% target.’
However, the bullish market mood is allowing the increasingly risk-sensitive Pound to gain a little ground against the US Dollar (USD).
US Dollar (USD) Quiet Ahead of NFP Release
The US Dollar is trading quietly this morning, as investors await impactful data due to be released this afternoon.
The focus is on the latest non farm payrolls release, reflecting the number of private sector jobs created in October. Economists are currently anticipating a significant drop from 336,000 to 180,000, which could weaken the ‘Greenback’.
Earlier this week, the latest ADP employment figures printed below expectations. This prompted speculation of a cooling labour market, and any further indications could mount pressure on USD.
Additionally, speculation continues to mount that the Federal Reserve has reached the end of its tightening cycle.
This is leading to upbeat trade, which is preventing the ‘Greenback’ from gaining ground against riskier assets. With all major central banks having now paused their tightening cycles, investors are feeling more upbeat about global economic prospects, capping the safe-haven’s movement.
However, if the afternoon’s labour data surprises to the upside, USD could begin to climb against its peers.
Pound US Dollar Exchange Rate Forecast: US Services Slowdown to Dent USD?
This afternoon, the US Dollar could see further volatility after the publication of the latest ISM services PMI. October’s reading is forecast to have slowed from 53.6 to 53, which could dent USD exchange rates by indicating economic woes.
As the services sector makes up the bulk of the US economy, any signs of slowing activity could prove worrisome for USD investors.
For the Pound, the data calendar is set to remain light for the remainder of the session and early next week. Because of this, Sterling could remain trapped in narrow boundaries.
Risk appetite may play a role in shaping the pairing. If the market mood takes a dive, the safe-haven US Dollar could climb against Sterling.