Pound US dollar (GBP/USD) wavers near eight-week high amid surmounting Fed rate cut bets

Pound US dollar (GBP/USD) wobbles near two-month high

(Updated 16:00, 16/05/2024) The pound US dollar (GBP/USD) exchange rate retreated slightly this afternoon following the latest US jobs data, though held close to its recent multi-week highs.

Initial jobless claims in the US for the week ending 11 May fell slightly less than forecast, dipping from the previous week’s 232,000 to 220,000. While slightly missing market projections, the US dollar garnered some investor interest amid signs of resilience in the American labour market.

Michelle Meyer, Chief Economist at MasterCard Economics Institute, said:

‘It shows that the economy is evolving as it should be as this business cycle matures. So, initial jobless claims — still very low. Little to no evidence of challenges in the labour market.’

Meanwhile, tepid commentary from Bank of England (BoE) policymaker Megan Greene failed to boost the pound.

The typically hawkish rate-setter commented:

‘In considering for how long we must retain our restrictive stance before policy should be eased, I think the burden of proof therefore needs to lie in inflation persistence continuing to wane.’

While Greene called for further evidence of easing inflation persistence, a largely lacklustre sentiment coupled with stubborn market interest rate cut projections left the BoE comments to fall largely by the wayside.

Tomorrow, further commentary from BoE policymaker Catherine L Mann could imbue GBP exchange rates with some additional volatility. While Mann generally leans restrictive in her policy stance, any convincingly hawkish comments could see GBP edge higher.

At the time of writing, GBP/USD is trading at around $1.2667, down approximately 0.2% from today’s morning level.

Original article continues below:

Pound US dollar (GBP/USD) muted amid sparsity of data

The pound US dollar (GBP/USD) exchange rate is fluctuating this morning, as the latest US inflation prints continue to undermine the currency pairing.

At the time of writing the GBP/USD exchange rate is trading at around $1.2670, virtually unchanged from this morning’s opening rate.

US dollar (USD) wavers near monthly low amid ramped up Fed rate cut bets

The US dollar (USD) is subdued this morning, holding close to the multi-week lows struck yesterday amid signs of easing US inflation.

A data-light start to the session sees USD struggling to attract investor support, left vulnerable to dialled up Federal Reserve interest rate cut bets in the wake of an easing American CPI last night.

Janet Mui, Head of Analysis at RBC Brewin Dolphin, said:

‘It is fair to say disinflation is in progress. It is just bumpy and taking longer to achieve the Fed’s desired level. The data is a relief for those who were worried about further re-acceleration in US inflation, but also shows inflation remains sticky and it could take a while to get back to 2%.’

Following an influx of hawkish Fed signals and sticky inflation throughout the first quarter of 2024, signs that US inflation has returned to a period of cooling leaves USD on the defensive this morning ahead of further macroeconomic releases due out later today.

Pound (GBP) subdued ahead of BoE speech

The pound (GBP) is struggling to garner investor support this morning amid a lack of fresh macroeconomic releases in the UK.

With data in short supply today, markets await commentary from Bank of England (BoE) policymaker Megan Greene, due this afternoon.

Amid a period muddled central bank commentary, investors may be keen to assess Greene’s stance, in order to gain a clearer understanding of the central bank’s potential monetary policy changes in the coming months.

Speaking on the central bank’s current approach to monetary policy, BoE Chief Economist Huw Pill most recently said:

‘I think it’s not unreasonable to believe that through the summer we will begin to see enough confidence in the decline in persistence that Bank Rate will come into consideration.’

While Greene typically advocates for a more hawkish approach towards BoE monetary changes, any push back against monetary unwinding could see GBP post some modest gains.

Alternatively, should Greene echo her cohort’s increasingly accommodative rhetoric, signs of a dovish BoE consensus could see Sterling falter.

Pound US dollar exchange rate forecast: US jobs data to buoy the ‘greenback’?

Looking ahead, the latest American employment data is due for release this afternoon. The number of newly unemployed US citizens claiming benefits is due to have fallen to 220,000 for the week ending May 11. Should the data print as forecast, signs of gradual improvement in the US labour market could see USD recoup some of this week’s losses.

In addition to this, commentary from Fed policymakers Patrick T Harker, Raphael Bostic, Loretta J Mester and Michael S Barr later today could imbue USD exchange rates with additional volatility. Should policymakers strike dovish, the ‘greenback’ could extend its recent losses.

Yasmine Arasteh

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