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Pound US Dollar Exchange Rate Traded Erratically on Mixed US Jobs Data

Stacks of US Dollar (USD) banknotes.

GBP/USD Exchange Rate Wavers amid UK’s Recession Fears and Mixed US Data

The Pound US Dollar (GBP/USD) exchange rate failed to find a clear direction despite the ever-worsening cost-of-living crisis weighing on the UK, as US jobs data printed to mixed results.

At time of writing the GBP/USD exchange rate is around $1.1560, relatively unchanged from this morning’s opening levels.

Pound (GBP) Hindered by Looming Recession Fears

The Pound (GBP) stooped to near 37-year lows as soaring inflationary pressures kept a firm lid on Sterling.

The British Chambers of Commerce (BCC) have added their own gloomy report to the growing number of downbeat outlooks on the UK economy. Warnings of an imminent recession threaten to plunge millions of households into poverty without swift assistance from the UK government. President of the BCC, Baroness Ruby McGregor-Smith, said that it wasn’t just families that need help:

‘We’re not just talking about big businesses, many of whom are going to really, really struggle. We’re talking about more and more and more SMEs (small to medium enterprises), which are the lifeblood of our economy. So, they need more support now, as they did during Covid.’

However, the Chancellor of the Exchequer, Nahid Zahawi, has provided some much-needed news to the UK and its economy, as he outlined the importance of prolonged support, not just a one-off assistance. He said:

Now, the £37 billion that we are midway through delivering will help so that everyone getting £400 off their energy bills will deal with about 50% of the new energy price cap rise between October and December, we need to look at January and then beyond that.

‘We are going to be resilient; we’re going to put help into households and to businesses so the targeting, I think, is the right approach.’

All eyes will be on Monday when the new prime minister will finally be announced. Investors will be eagerly awaiting how the incoming leader plans to steer the UK out of the quagmire of economic destitution.

US Dollar (USD) Muted after Mixed Jobs Data

The US Dollar (USD) initially saw a drop in demand on the printing of higher unemployment but was saved by a better-than-expected increase in non-farm payrolls.

Coming in 15,000 more than an expected 300,000 increase and lend support to the narrative of a robust labour market. John Leiper, Chief Investment Officer at Titan Asset management, said of the data:

‘Non-Farm Payrolls takes on greater importance this week in the wake of Jerome Powell’s Jackson Hole speech. Further, more people have re-joined the workforce and as a result wage growth came in lower than expected with average hourly earnings at 0.3% versus 0.5% in July.

‘Bottom line, these are positive numbers but will do little to change the 75bp versus 50bps rate hike. All eyes now turn to the next US inflation print on September 13th.’

Attention will shift to next week and PMI data for the month of August. If the economy remains buoyant and maintains expansion in both the non-manufacturing and services sector, rate hike expectations will remain elevated.

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