Home » GBP » GBP to USD » Pound US Dollar Exchange Rate to Plunge on Tight US Labour Market?

Pound US Dollar Exchange Rate to Plunge on Tight US Labour Market?

US Dollar banknotes

GBP/USD Exchange Rate Strengthens on Rebounding UK Economy

The Pound US Dollar (GBP/USD) exchange rate is climbing this morning in the wake of better-than-expected GDP growth in the UK.

At time of writing the GBP/USD exchange rate is around $1.1976, almost a half percent climb from this morning’s opening levels.

Pound (GBP) Buoyed by a Return to Growth

The Pound (GBP) is enjoying renewed demand this morning after GDP growth printed better than expected. The UK showed a modest recovery in January and showed an increase of 0.3%, better than the expected 0.1% rise.

In stark contrast to the 0.5% slump in December, weighed heavily by industrial action and the cost-of-living crisis, a modest rebound is buoying investors. The stronger-than-expected recovery could give Chancellor Jeremy Hunt a boost before the budget next week. Set to outline the government’s tax and spending plans, a welcome rebound in GDP growth could provide Hunt some much-needed breathing room.

However, despite renewed optimism surrounding the economy, recession fears remain. Yael Selfin, Chief Economist at KPMG UK, said that the UK isn’t quite out of the woods yet:

‘The marked fall in wholesale gas prices and easing of supply chain disruptions provided a welcome boost to economic prospects at the start of 2023. But this may not be sufficient to stave off a recession in the first half of this year, as consumer spending remains weak with households continuing to be squeezed by elevated prices and higher interest rates.’

Looking ahead to next week, crucial jobs data could provide one last boost to the Pound before Hunt delivers the Spring Budget.

US Dollar (USD) Subdued ahead of Non-Farm Payrolls

Meanwhile. the US Dollar (USD) is quiet this morning, with only a risk-off market mood providing a modicum of support. All attention has been shifted to the labour market data released later today.

Looking ahead and investors appeared to have moved to the sidelines ahead of the flurry of labour market data. With the previous month’s non-farm payrolls smashing forecasts and increasing by 517,000, another surprise rise could rally the US Dollar once more.

Expectations of a 205,000 increase still point to a red-hot labour market, as well as an expected low unemployment rate. Predictions of the jobless rate to remain steady at a 54-year low at 3.4%, the data could allow the Federal Reserve to further continue its tightening cycle, buoying USD investors.

Comments are closed.