Pound US Dollar Exchange Rate News: Sterling Wavers amid UK Employment Release

September 11, 2024 - Written by John Cameron

STORY LINK Pound US Dollar Exchange Rate News: Sterling Wavers amid UK Employment Release

The Pound US Dollar (GBP/USD) exchange rate moved without a clear direction on Tuesday following the release of the UK’s latest employment data.

The Pound (GBP) saw a modest rise following the announcement of the UK's employment statistics for July.

The unemployment rate in Britain has dipped to 4.1%, aligning with forecasts and showing a decrease from earlier highs this year. Despite this positive trend, the wage data presented a more complex picture. Including bonuses, wage growth for the three-month period ending in July slowed to 4%, down from a revised 4.6% and slightly below the expected 4.1%. Excluding bonuses, wage growth also decelerated to 5.1%, consistent with projections but down from the previous 5.4%.

Persistent strong wage growth has been a point of concern for the Bank of England (BoE) policymakers, who worry that sustained high earnings could maintain inflationary pressures, thus complicating the bank's efforts to control inflation.

Liz McKeown, Director of Economic Statistics at the ONS said:

‘Growth in total pay has slowed markedly again as one-off payments made to many public sector workers in June and July last year continue to affect the figures.

Basic pay growth also continued to slow, though less sharply.’

Consequently, the GBP's potential gains were largely capped today, amidst a slight increase in expectations for further BoE rate cuts this year.

The US Dollar (USD) experienced fluctuations on Tuesday, primarily due to a lack of significant economic data and mixed sentiments in the market.

Looming concerns over a potential US recession this year have cast a shadow over the 'greenback,' with no new data to influence its trajectory.

Analysts at ING commented:

‘After all the mark et volatility witnessed in July as the yen carry trade was unwound, investor focus has moved swiftly onto the topic of a soft landing versus a recession. Will the Federal Reserve easing cycle be orderly, or will it be rushed into more aggressive easing? The size of the Fed’s first cut is a close call for us, but we narrowly opt for 50bp.’

Additionally, a slight dip in US Treasury bond yields exerted extra downward pressure on USD exchange rates, positioning the currency near its recent lows. Market watchers are also keenly awaiting the latest inflation figures, with expectations set for headline inflation to decrease from 2.9% to 2.7%. This anticipated data release could trigger significant volatility in the USD and potentially increase the likelihood of a rate cut by the Federal Reserve.

In the upcoming financial forecasts, the Pound US Dollar exchange rate is poised to be significantly influenced by the release of the UK's latest monthly GDP figures.

Economists are anticipating a modest growth of 0.2% for July. Should the actual figures align with these projections, the Pound might find some support.

On the other side of the Atlantic, the US is set to release its latest inflation data, which is expected to show a decrease in headline inflation from 2.9% to 2.7%. A further easing of inflationary pressures in the US could increase the likelihood of a rate cut by the Federal Reserve, which might undermine the strength of the US Dollar.

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TAGS: Pound Dollar Forecasts