Pound US dollar (GBP/USD) exchange rate tepid as UK unemployment rises
The pound US dollar (GBP/USD) exchange rate is flat this morning, following a jump in UK unemployment levels.
At the time of writing, GBP/USD is trading at around US$1.2439, showing little movement from the morning’s opening rates.
Pound (GBP) wavers amid downbeat labour data
The pound (GBP) is muted this morning following the latest UK jobs data, which showed a jump in unemployment.
In February, the unemployment rate jumped to 4.2% from an upward revision of 4% in January. Between a rising number of people out of work and falling vacancies, there is growing evidence of the UK labour market slowing.
Furthermore, wage growth cooled in the three months preceding February, with the reading printing at 6%, down from 6.1%.
Both figures are increasing bets that the Bank of England (BoE) will cut interest rates in the summer.
Jake Finney, an economist at PwC, commented that:
‘The latest data suggests the UK labour market continues to cool, albeit at a gradual pace considering the strain the economy has been under over the past few years. The unemployment-to-vacancies ratio, a key measure for the Bank of England, ticked up to 1.6 in the three months to February 2024 as unemployment increased and vacancies fell further.’
However, the pound is managing to remain afloat this morning, as markets look ahead to tomorrow’s inflation data.
US dollar (USD) supported by risk-averse market mood
The US dollar (USD) is enjoying some support this morning, amid a risk-averse market mood. This is allowing the safe-haven ‘greenback’ to strengthen against some of its peers.
Further lifting the US dollar is continued escalation in the Middle East which is serving to weaken the market mood.
Iran and Israel are currently engaged in a game of brinkmanship following Iran’s retaliation to Israel’s reported attack on its embassy. Ideally, cooler heads will prevail in the future, but the situation hangs on a knife-edge.
Additionally, mixed economic data from China is further scuppering investor’s spirits. While the latest Chinese GDP data exceeded forecasts, its gains were tempered somewhat by weak industrial production data.
Pound US dollar exchange rate forecast: UK inflation data in focus
Looking ahead for the pound, the core catalyst of movement is likely to be the latest inflation data, due print tomorrow.
Economists forecast that both the headline and core inflation rates will have cooled in March, which could weaken Sterling. Cooling inflation may prompt markets to increase their bets on interest rate cuts from the Bank of England, as the headline rate moves closer to its 2% target.
This is followed by a speech from BoE Governor Andrew Bailey tomorrow evening. If Governor Bailey hints at upcoming policy loosening, the pound could weaken further.
For the US dollar, meanwhile, impactful data releases are relatively thin on the ground. This could prompt investors to focus on the latest initial jobless claims release on Thursday, for the week ending April 13.
Claims are forecast to have increased over the week, which may weaken USD by suggesting slack in the labour market.