Pound US Dollar Exchange Rate News: GBP/USD Slumped as US Labour Market Remains Tight

March 2, 2023 - Written by John Cameron

STORY LINK Pound US Dollar Exchange Rate News: GBP/USD Slumped as US Labour Market Remains Tight

US Dollar (USD) Soared on Bolstered Rate Hike Bets

The US Dollar (USD) experienced renewed strength in the wake of stronger-than-expected employment data. A cautious market mood lent considerable strength to the ‘Greenback’ earlier in the session but firmed with the release of initial jobless claims.

The weekly jobless claims declined to 190k against an expected 195k, highlighting the continuously tight labour market. The US Department of Labor (DOL) released the latest figures, and showed the figure remained close to the nine-month low in January. This could potentially force employers to raise wages in order to maintain and attract staff, adding inflationary pressures. In turn, the Fed could continue their rate hiking policy, boosting the US Dollar. The DOL added:

‘The advance number for seasonally adjusted insured unemployment during the week ending February 18 was 1,655,000, a decrease of 5,000 from the previous week's revised level.’

Elsewhere, the ‘Greenback’ enjoyed renewed safe-haven flows as the global market sentiment soured on further interest rate raises across the major central banks. Investors look to be hedging their bets with the safer currencies.

Pound (GBP) Soured on Mounting Economic Pressures

Meanwhile, the Pound (GBP) struggled to reclaim its stellar form from earlier in the week as a lack of major data left Sterling exposed to market sentiment. Further evidence of a cooling housing market also weighed on investors’ moods.

Taylor Wimpey, one of the largest house-builders in the UK, confirmed that a myriad of problems plagued the housing sector. With both sales and reservations declining substantially this year, the broader economic uncertainty continues to exert downward pressures.

Elsewhere, a cautious speech from Bank of England (BoE) Governor Andrew Bailey further poured cold water on rate hike optimism. Talking at a conference on the cost-of-living crisis yesterday, Bailey commented that interest rates may have peaked. He also added that the BoE will now adopt a ‘wait and see’ strategy, with a focus on economic data to influence policy decisions. Bailey said:

‘At this stage, I would caution against suggesting either that we are done with increasing Bank rate, or that we will inevitably need to do more. Some further increase in Bank rate may turn out to be appropriate but nothing is decided.’

GBP/USD Exchange Rate Forecast: Fed Speech to Rally Greenback Higher?

Looking ahead, the Pound US Dollar exchange rate could see the US Dollar surge higher when Fed board member Christopher Waller is set to speak late on Thursday. In the wake of better-than-expected labour market data, a hawkish tone is expected to be struck, potentially bolstering the US Dollar higher.

Meanwhile, the Pound will have to wait until Friday for further economic data. Final PMI readings for services could boost Sterling if the final figure improves from the better-than-expected preliminary scores.

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TAGS: Pound Dollar Forecasts