Pound US dollar (GBP/USD) exchange rate flat amid light data calendar

Pound US dollar (GBP/USD) exchange rate tepid amid lull in data releases

The Pound US dollar (GBP/USD) exchange rate is flat this morning, as a lack of impactful data pressures both currencies.

At the time of writing, GBP/USD is trading at around US$1.2701, showing little movement from the morning’s opening rates.

Pound (GBP) listless amid light data calendar

The pound (GBP) has begun the week in a similar manner to last week, as it lacks clear direction due to an absence of data.

However, it is remaining afloat against some peers as they weaken due to external factors, such as the euro.

Elsewhere, analysis of the UK’s political outlook may be serving to underpin Sterling. With the UK elections upcoming, the Labour party is considered the frontrunner in the proceedings.

Markets have discussed that a Labour victory may be positive for the pound, due to their modestly pro-growth agenda.

Analysts at JP Morgan commented:

‘Labour agenda is modestly pro-growth, but crucially with a likely cautious fiscal approach. Our economists believe that, given the lack of fiscal space, Labour will likely focus on supply-side reforms to help improve economic growth.’

US dollar (USD) mixed amid lack of data

The US dollar (USD) is trading in a mixed capacity this morning. Due to a lack of impactful macroeconomic data, USD is being left to trade in line with the market mood.

Due to the downbeat tone to the morning’s trade, the ‘greenback’ is enjoying some gains against weaker peers. Political uncertainty in Europe following the latest elections and poor performances form incumbent candidates is scuppering the mood.

Furthermore, the US dollar is likely carrying its momentum forward from last week’s red-hot non farm payrolls print. Due to signs of robust employment, markets have begun to expect that the Federal Reserve will only cut rates twice this year.

James Knightley, Chief International Economist at ING, commented:

‘In terms of what this means for the Fed next week – well it confirms that the Fed will be pushing back rate cut projections from 3 cuts this year and 3 cuts next year to most probably 2 cuts this year and 4 next, but we can’t rule them out saying just one for this year.’

Ultimately, the lack of impactful data due this session is likely to keep any gains limited for the ‘greenback’. However, if trading conditions deteriorate further, USD could gain additional support.

Pound US dollar exchange rate forecast: UK wage data in focus

Looking ahead for the pound, tomorrow brings the release of the latest slate of UK labour data, reflecting unemployment and wage growth in April.

On a monthly basis, the UK unemployment rate is forecast to have held at 4.3%, which could underpin GBP by signalling a stable jobs market.

Additionally, in the three months preceeding April, average earnings excluding bonuses are forecast to have remained at 6%. This could strengthen the pound as it is considered a key inflationary pressure, and an unchanged reading may prompted decreased Bank of England (BoE) rate cut bets.

For the US dollar, anticipation is likely to build tomorrow for the Federal Reserve’s interest rate decision on Wednesday.

Recent data has indicated that the Fed may be able to keep rates unchanged for longer, which could bolster USD.

John Mulcahey

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