Pound US Dollar (GBP/USD) strengthens amid upbeat trading conditions
(Updated 14:40, 07/03/24)
The Pound US Dollar (GBP/USD) exchange rate hit a new seven-week high this afternoon before hovering back down as heavy risk-on flows undermined the safe-haven US Dollar (USD).
Further stymieing the ‘Greenback’ this afternoon are the latest US jobless claims.
In the week ending 2 March, the number of people claiming unemployment benefits in the US came in at 217,00, and printed above market expectations of 215,000. The previous week’s data was also revised higher.
The Pound (GBP) remained muted this afternoon amid a lack of economic data, and Sterling continued to trade on the back off the underwhelming UK Spring Budget. This may be limiting the Pound’s success against the US Dollar.
At the time of writing, GBP/USD is trading at around $1.2752, an increase of roughly 0.2% from today’s opening levels, having briefly touched a fresh seven-week high of $1.2766.
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Pound US Dollar (GBP/USD) exchange rate stays strong ahead of US data
The Pound US Dollar (GBP/USD) exchange rate is trapped in a narrow range this morning, holding strong near a seven-week high struck yesterday, ahead of several notable US data releases.
At the time of writing, GBP/USD is trading at $1.2750, virtually unchanged from the start of today’s trading session.
US Dollar (USD) rangebound ahead of key data
The US Dollar (USD) is trending mostly flat against the majority of its peers this morning, as it licks its wounds following yesterday’s sell-off amid a decline in US Treasury bond yields and confirmation from Federal Reserve Chair Jerome Powell that the central bank would cut interest rates this year.
USD investors are today awaiting Powell’s further testimony, expected later this afternoon, for any additional forward guidance surrounding the timing of rate cuts.
The Chair told US lawmakers that interest rates will likely begin coming down this year, but he also warned the central bank needed to be ‘more confident’ that inflation is moving sustainably towards its 2% target.
Should Powell deliver any further dovish commentary as he continues his address, USD could weaken again throughout today’s European session.
Also in the spotlight today are the latest domestic initial jobless claims.
In the week ending 2 March, the number of people claiming unemployment benefits in the US is expected to remain at 215,000, and could lend the ‘Greenbank’ some modest support should the data match expectations.
Pound (GBP) subdued following Spring Budget
The Pound (GBP) is treading water this morning, faltering against some of its more risk-sensitive peers, following the unveiling of the UK’s Spring Budget.
UK Chancellor Jeremy Hunt addressed Parliament yesterday where he delivered a slew of tax cuts designed to boost economic growth, such as the widely expected 2p cut to national insurance.
However, a forecast from the Office for Budget Responsibility (OBR) predicted that UK inflation would fall below 2% within the next few months, which in turn bolstered Bank of England (BoE) rate cut bets, denting Sterling’s trade.
Financial worries following the Budget’s release have also put pressure on the Pound this morning, with some economists stating Hunt has ‘thrown fiscal caution to the wind’.
Torsten Bell, Chief Executive of the Resolution Foundation, warned:
‘The £19 billion of cuts to unprotected public services after the next election are three-quarters the size of those delivered in the early 2010s. The idea that such cuts can be delivered in the face of already faltering public services is a fiscal fiction.’
This combination of rising rate cut expectations and concerns about public spending in years to come has muted GBP’s progress today. However, the increasingly risk-sensitive currency is holding strong against the weaker US Dollar.
GBP/USD exchange rate forecast: US non-farm payrolls to dent USD?
Looking ahead, the primary catalyst of movement for the Pound US Dollar exchange rate on Friday is likely to be the latest US non-farm payrolls data.
The data is expected to report that the US economy added 200,000 jobs in February, significantly down from January’s 353,000 new jobs, which marked the biggest rise in employment in a one-year period.
Should the data match expectations and point to a slowdown in the US labour market, this may dent USD exchange rates at the end of the week. However, if the data once again exceeds forecasts, the US Dollar could surge.
Turning to the Pound, a lack of macroeconomic data tomorrow may leave Sterling trading on risk sentiment. GBP could also face movement as markets and economists continue to digest the latest Budget.