Pound US Dollar (GBP/USD) exchange rate slips as UK employment softens
The Pound US Dollar (GBP/USD) exchange rate is weakening this morning, in the wake of softer-than-expected UK employment data.
At the time of writing, GBP/USD is trading at around US$1.2789, a drop of just over 0.2% from the morning’s opening levels.
Pound (GBP) stumbles as wage growth and employment softens
The Pound (GBP) is under pressure this morning following the release of the latest UK wage and employment data.
In the three months preceding January, average earnings excluding bonuses cooled to 6.1%, beneath forecasts of 6.2%.
Furthermore, the unemployment rate in January unexpectedly crept higher, printing at 3.9% on a monthly basis.
While the figures don’t reflect an emphatic slowdown in either wage growth or the labour market, they do suggest softening. This is, in turn, weighing on Sterling as investors consider interest rate cuts from the Bank of England (BoE).
Jack Kennedy, Senior Economist at Indeed, commented:
‘Today’s Office for National Statistics figures paint a familiar picture of further gradual softening in the labour market and easing pay pressures, but it remains an incremental process. Regular pay growth edged down, but is still running well above levels where the Bank of England would be comfortable initiating interest rate cuts.’
As the data reflects softer levels rather than a clear drop, Sterling’s losses are likely remaining limited this morning.
US Dollar (USD) flat ahead of inflation data
The US Dollar (USD) is wavering this morning, as markets await the latest US consumer price index release.
February’s inflation data is due to print this afternoon, with headline CPI forecast to have remained unchanged at 3.1%.
However, the monthly core inflation rate is expected by some analysts to print at 0.3%. which could delay Federal Reserve interest rate cut bets.
Francesco Pesole, FX Strategist at ING, explained:
‘This remains at least 0.1% above the pace that would provide the Fed with confidence in a return to the 2% YoY target and suggests any rate cut before the June meeting remains unlikely.’
Elsewhere, a cautiously upbeat market mood is applying additional pressure to USD this morning. Due to its safe-haven nature, the ‘Greenback’ is unable to attract support as investors eye more risk intensive options.
Pound US Dollar Exchange Rate Forecast: UK economic growth to lift GBP?
Looking ahead for the Pound, tomorrow brings the release of the latest UK GDP data, reflecting growth in January.
On a monthly basis, the economy is forecast to have expanded by 0.2%, which could soothe investor recession fears.
While the UK is in a technical recession, improving activity may delay BoE rate cut bets, which may lift GBP.
For the US Dollar, the core catalyst of movement is likely to be February’s retail sales data, due to print on Thursday.
Sales are forecast to have increased by 0.8% compared to January, which may strengthen USD by indicating robust consumer spending. However, as this would suggest a recovery to previous levels, any gains may be limited.
Elsewhere, risk appetite is likely to play a significant role in shaping the pairing. As the Pound is more risk-sensitive, a shift towards bullish trade could lift GBP/USD.