Will UK Earnings Data Cause GBP/USD Exchange Rate Rise?
The Pound to US Dollar (GBP/USD) exchange rate has started to recover today, following a sharp drop when the Bank of England (BoE) froze UK interest rates.
Pound exchange rates remain at risk of volatility in the near-future, when UK jobs market data is released on Tuesday.
This will consist of March’s unemployment rate and average earnings figures, along with a measure of jobless benefit claimants in April.
The earnings stats, seen as a key factor in whether the Bank of England (BoE) raises interest rates, are forecast to show higher earnings without bonuses.
The pace of earnings growth with bonuses included is conversely expected to slow; this is considered the more high-impact of the two readings.
If wage growth slows, the unemployment rate rises and more jobless claims are reported then the Pound (GBP) could fall back against the US Dollar (USD).
UK Inflation Rate Acceleration could Boost Pound to US Dollar (GBP/USD) Exchange Rate
Looking further ahead, the Pound (GBP) has a chance at advancing against the US Dollar (USD) when UK inflation rate data is released on 23rd May.
Previously, the year-on-year reading dropped from 2.7% to 2.5% between February and March.
This panicked GBP traders, who were concerned that lower inflation would reduce pressure on the Bank of England (BoE) to raise interest rates.
With than in mind, April’s year-on-year inflation rate reading is predicted to show growth from 2.5% to 2.6%.
Such a result could boost hopes that a 2018 interest rate hike is back on the table, as it would see inflation rising but remaining below the pace of wage growth.
The Pound might appreciate on such a result, given that there are still lingering hopes for the BoE interest rate to hit 0.75% this year.
Retail Sales Slowdown could Cause US Dollar to Pound (USD/GBP) Exchange Rate Losses
The next US data to watch out for will be retail sales results for April, due for release on the coming Tuesday.
In a development that could weaken the US Dollar, levels of month-on-month and year-on-year sales activity are both forecast to decline.
Sales growth is expected to remain positive, but slowdowns might cause a rethink about whether Fed interest rate hikes are imminent or further off.
Slowing US Goods Orders Risk Further USD/GBP Exchange Rate Decline
Later in May on the 25th, the US Dollar (USD) could make additional losses against the Pound (GBP) when durable goods orders stats for April will be released.
As with the earlier retail sales stats, levels of goods orders are also forecast to decline; in this case the predicted drop would be from 2.6% to 1.6%.
The durable goods category includes machinery, so a slowdown might weaken the US Dollar because of fears about the manufacturing sector struggling.