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GBP/USD to Soften amid Cooling UK Wage Growth?

Stacks of US Dollar (USD) banknotes.

Pound US Dollar (GBP/USD) Exchange Rate Rangebound amid Lack of Data

The Pound US Dollar (GBP/USD) exchange rate is treading water this morning, due to a lack of impactful data releases.

At the time of writing, GBP/USD is trading at around US$1.2621, showing minimal movement from the day’s opening levels.

GBP to Soften amid Cooling Wage Growth?

Today, the Pound (GBP) is wavering due to a lack of impactful macroeconomic data. However, due to Sterling’s increasingly risk-sensitive nature, the bullish tint to the day’s trade is keeping it afloat.

Looking ahead, tomorrow is likely to be a turbulent day for the Pound, owing to the release of the latest batch of labour data. December’s unemployment rate and wage growth figures are due to print.

Unemployment is expected by economists to have increased in December, with the rate rising to 4%. This could weaken GBP by indicating growing looseness in the UK labour market.

Furthermore, average earnings excluding bonuses are anticipated to have cooled in December, dropping from 6.6% to 6%.

This may pile additional pressure on the Pound as the Bank of England (BoE) have consistently highlighted wage growth as a key inflationary pressure, and further cooldowns may lead to increased expectations of interest rate cuts.

Elsewhere, risk appetite is likely to play a role in shaping the Pound’s movement over the near term. If trading conditions remain upbeat, GBP exchange rates could enjoy extra support as investors favour riskier assets.

USD to Weaken amid Cooling Inflation?

So far today, the US Dollar (USD) is enduring muted trade as an upbeat market mood prevents the safe-haven currency from finding its footing.

The ‘Greenback’ may see fresh volatility over the course of the day’s trade, however, as markets eye speeches from a series of Federal Reserve officials.

Member of the Board of Governors Michelle Bowman is due to speak this afternoon, followed by Bank of Minneapolis CEO Neel Kashkari this evening. If they present a unified hawkish consensus, the US Dollar could gain ground against its peers.

Tomorrow, the latest US inflation data is due to print and is likely to drive movement for the ‘Greenback’.

Both the core and headline inflation rates are expected to have cooled in January, which may prompt escalating interest rate cut bets, which could weaken the US Dollar.  However, if inflation prints above expectations, USD may strengthen as investors pare these bets back.

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