US Dollar to Pound Exchange Rate Slides as US Labour Market Softens

September 13, 2024 - Written by John Cameron

STORY LINK US Dollar to Pound Exchange Rate Slides as US Labour Market Softens

The Pound US Dollar (GBP/USD) exchange rate posted modest gains on Thursday following the latest US jobs release.

At the time of writing GBP/USD was trading at around $1.3058 at the time of writing, up approximately 0.2% from Thursday’s opening levels.

The Pound (GBP) faced headwinds on Thursday, hampered by a void in fresh British economic data.

A mixed market mood further deterred investor interest in GBP, owing to the currency’s increasingly risk-sensitive status.

Moreover, the Pound continued to face light tailwinds from the impact of lacklustre UK economic growth figures released the previous day, with no subsequent developments to offset the negative sentiment.

Chris Turner, Global Head of Markets at ING, said:

‘UK rates softened quite a lot yesterday and for the month so far, two-year sterling swap rates are off around 30bp. It is unclear whether this is a function of the soft UK GDP data yesterday or more just a conviction that rates will be taken lower around the world and that the UK should be no exception – despite radio silence from the Bank of England.’

Despite earlier conjectures that the Bank of England (BoE) might opt for a more tempered approach to policy easing relative to other major central banks, the prevailing global policy adjustments coupled with the UK's sluggish economic performance appear to be curbing any immediate prospects for a recovery in GBP exchange rates.

The US Dollar (USD) struggled to attract investor support on Thursday despite news of persistently high producer prices in the US.
The latest data from the American Producer Price Index (PPI) exceeded expectations, registering a 0.2% increase in August, up from a previously revised flat rate.

However, the potential for a robust dollar was undercut by increasing concerns over a weakening US labour market, which could lead the Federal Reserve to initiate a cycle of aggressive policy easing sooner rather than later.

The most recent data on initial jobless claims surpassed predictions, rising to 230,000 and indicating a continued increase in the number of Americans filing for unemployment benefits.

This figure remained consistently above the averages recorded at the beginning of the year, amplifying worries about a deteriorating labour market following a disappointing US payroll report for August.

In addition, a modest dip in US Treasury bond yields further pressured the dollar, pushing it towards recent lows.

Looking ahead, a lack of immediate data could see global risk dynamics drive movement in the currency pairing as the week draws to a close. An improving market mood could lend the increasingly risk-sensitive Pound support, while downbeat trade may see investors favour the safe-haven US Dollar.

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TAGS: Dollar Pound Forecasts