Pound US Dollar (GBP/USD) Exchange Rate Narrow as UK Jobs Market Cools
The Pound US Dollar (GBP/USD) exchange rate is rangebound this morning, amid a downbeat slate of UK labour data.
At the time of writing, GBP/USD is trading at around US$1.2563, showing little movement from the morning’s opening rates.
Pound (GBP) Undermined by Cooling Wage Growth
The Pound (GBP) is struggling for support this morning, following the latest slate of UK labour market data.
While unemployment remained unchanged in October, average earnings cooled below forecasts, suggesting easing cost pressures. This could set the stage for the Bank of England (BoE) to begin to entertain future interest rate cuts as wage growth continues cooling.
Although the unemployment rate was the same, job vacancies fell for the 17th month in a row, indicating looseness in the jobs market. This, in turn, suggests that inflationary pressures could be easing.
Darren Morgan, Director of Economic Statistics at ONS, commented:
‘This is now the longest period of decline on record, longer than in the immediate aftermath of the 2008 downturn. Nevertheless, the number of vacancies still remains well above its pre-pandemic level. While annual growth in earnings remains high in cash terms, there are some signs that wage pressure might be easing overall. However, as inflation has been falling more quickly, pay continues to grow in real terms.’
Elsewhere, the cautiously upbeat market mood may be cushioning Sterling this morning. As an increasingly risk-sensitive currency, the eye towards riskier assets is likely preventing it from further losses.
US Dollar (USD) Struggles as Markets Await US Inflation Data
The US Dollar (USD) is edging lower this morning, as investors anticipate the afternoon’s consumer price index release.
In November, headline CPI is forecast to cool to 3.1%, whereas core inflation is expected to have held at 4%. Both readings would be indicative of inflation stabilising significantly above the Federal Reserve’s 2% target rate.
As such, this could prompt more hawkish rhetoric at tomorrow’s interest rate decision. Similarly, a sticky inflation reading this afternoon could lift USD as we head through the session.
Ahead of this release, however, investors appear hesitant to support the ‘Greenback’. The market mood is currently skewing upbeat, preventing the safe-haven currency from finding support against its peers.
Pound US Dollar Exchange Rate Forecast: UK GDP Stall in Focus
Looking ahead for the Pound, the core catalyst of movement will be the latest GDP growth rate, reflecting economic growth in October.
Economists forecast a flat 0%, which could weigh heavily on Sterling by sparking anxieties over the UK’s economic outlook. Recession concerns remain ever-present amid record-high interest rates and high inflation, and a downbeat reading may push these worries further.
For the US Dollar, the Federal Reserve is set to announce its latest interest rate decision on Wednesday evening.
While a hold is widely expected, Fed Chair Jerome Powell is likely to push back on any expectations of interest rate cuts. If he proves persuasive, the ‘Greenback’ could rally.