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Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast: Fall in Wage Growth Undermines US Dollar Demand

US Dollar Currency Forecast

Pound Sterling to US Dollar (GBP/USD) Exchange Rate Holds Gain as US Wage Growth Slows

The Pound Sterling to US Dollar (GBP/USD) exchange rate shed its earlier gains to trend in the region of 1.5115 following the publication of employment figures for the US.

The US was shown to have added 252,000 positions in December, more than the 240,000 forecast.

This followed a jobs gain of 353,000 in November. The figures resulted in the US unemployment rate falling from 5.8% to 5.6%. A smaller decline in joblessness to 5.7% had been anticipated.

As the report supports the case in favour of a sooner-rather-than-later interest rate hike from the Federal Reserve, the US Dollar broadly strengthened following the report’s publication.

However, as investors focused on the decline in average earnings, the US Dollar’s uptrend proved to be short lived and the  GBP/USD exchange rate returned to trending in the region of 1.5148

Earlier…

The Pound Sterling to US Dollar (GBP/USD) exchange rate recovered 0.4% on Friday to trend in the region of 1.5156

GBP/USD Exchange Rate Climbs as Trade Deficit Narrows

The Pound Sterling to US Dollar (GBP/USD) exchange rate pushed higher as the European session progressed and the UK’s trade deficit in goods and services was shown to have narrowed from 2.2 billion in October to 1.4 billion in November.

While the result was positive, economist David Kern cautioned; ‘The UK faces a national challenge when it comes to trading the world. The Monetary Policy Committee must persevere with low interest rates for most of this year and we need to redouble our efforts to place exports at the heart of businesses’ growth strategy if we are to achieve the government’s export target and rebalance the economy.’

The Pound Sterling to US Dollar (GBP/USD) exchange rate also derived support from the news that UK manufacturing production increased by 0.7% on the month and 2.7% on the year in November, smashing forecasts for a monthly gain of 0.3% and an annual increase of 2.3%.

Earlier…

GBP/USD Exchange Rate Climbs as Rate Hike Risks Highlighted

After trading at multi-month lows for much of the week as a result of sub-par UK data and expectations for a Federal Reserve rate hike taking place in the first half of this year, the Pound Sterling to US Dollar (GBP/USD) exchange rate eked out a modest gain ahead of the release of the US Non-Farm payrolls report.

The ‘Greenback’ edged lower against several of its most traded currency counterparts as a high-profile Federal Reserve official warned of the risks attached to increasing US borrowing costs too early.

The Pound Sterling to US Dollar (GBP/USD) exchange rate hit a low of 1.5081

The US Dollar to Euro (USD/EUR) exchange rate’s five-day gain paused and the North American asset slid against the Yen.

The strength of recent US fundamentals and the alteration to the Federal Open Market Committee’s interest rate rhetoric has led to some industry experts betting that the Fed might increase borrowing costs as early as the first quarter of this year.

However, according to Federal Reserve of Minneapolis President Narayana Kocherlakota, raising interest rates this year would have adverse consequences and ‘only further retard the pace of the slow recovery in inflation.’

The Pound Sterling to US Dollar (GBP/USD) exchange rate achieved a high of 1.5125

Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast

Given that the US is set to release its highly influential US Non-Farm Payrolls report this afternoon, Pound Sterling to US Dollar (GBP/USD) exchange rate could well experience notable fluctuations in the hours ahead.

The jobs report is expected to show that the US economy added 240,000 positions in December, down considerably from the employment gain of 321,000 in November but still a decent enough increase to see the US unemployment rate fall to 5.7% from 5.8%.

If the jobs figures surprise to the upside the US Dollar could recover some of its previous losses. Similarly, if today’s National Institute of Economic and Social Research (NIESR) UK growth estimate for December shows a slowing in expansion (which, given the recent PMI results seems highly likely) demand for the Pound would be undermined.

The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5123

The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2809

The US Dollar to Euro (USD/EUR) exchange rate is currently trending in the region of 0.8469

The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1804