Pound US Dollar Exchange Rate Edges Higher in Early Trade
The Pound US Dollar (GBP/USD) exchange rate is trading with modest gains this morning, following the publication of the UK’s latest jobs report.
At the time of writing the GBP/USD exchange rate is trading at around $1.2298, Up roughly 0.3% from this morning’s opening levels.
Pound (GBP) Buoyed by Upbeat Jobs Data
The Pound (GBP) is trading positively against the US Dollar (USD) and the majority of its other peers so far this morning. This follows the publication of the UK’s latest jobs report, which proved more upbeat than expected.
According to data published by the Office for National Statistics (ONS) UK unemployment held at 4.2% in September. Beating forecasts it would tick up to 4.3%.
The accompanying earnings figures showed that wage growth (excluding bonuses) decelerated from an upwardly revised 7.9% to 7.7% in the three months to September.
Coupled with the fall in inflation over the same period, this led to a sharp increase in ‘real pay’ for the average household.
Regular pay (excluding bonuses) was 7.7% in July to September 2023, slightly down on the previous periods but still among the highest annual growth rates since comparable records began in 2001.
➡️ https://t.co/kNF3QWQo2X pic.twitter.com/3QfzvmIL01
— Office for National Statistics (ONS) (@ONS) November 14, 2023
The strong uptick in real pay is supportive of the Pound as it may encourage the Bank of England (BoE) to raise interest rates again.
However, Sterling’s gains remained modest in scope as observers warned that today’s data also highlights some slack in the UK labour market.
Victoria Scholar, head of investment at interactive investor, comments:
‘While the headline unemployment rate remains unchanged, there are some signs of slack in the labour market with a fall in job vacancies across 16 out of 18 industry sectors, highlighting the cautiousness among businesses across the economy towards hiring.’
US Dollar (USD) Subdued ahead of Key Inflation Figures
The US Dollar (USD) is struggling to find momentum this morning as USD investors are reluctant to make any aggressive bets ahead of the release of the US consumer price index latest this afternoon.
An expected slowdown in headline inflation could weaken Federal Reserve interest rate expectations and weigh on USD.
On the other hand, October’s CPI figures are also expected to show that core inflation remains resilient. This would be supportive of another interest rate hike from the Fed and could bolster the ‘Greenback’.
Either way, it’s likely that today’s US CPI figures will drive significant volatility in USD exchange rates today
Pound US Dollar Exchange Rate Forecast: Cooling UK Inflation to Drag on Sterling?
Looking past the US inflation figures to tomorrow’s session, its likely movement in the Pound US Dollar exchange rate will be dominated by the publication of the UK’s own CPI release.
Economists forecast October’s CPI figures will report inflation cooled from 6.7% to 4.8%. Such a rapid deceleration of inflation could act as a headwind for Sterling as it further undermines the odds of the BoE raising interest rates again in the near-future.
Meanwhile the US will publish its latest retail sales figures on Wednesday afternoon. These are expected to report sales growth slumped in October. Potentially leading the US Dollar to weaken.