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Pound US Dollar (GBP/USD) Exchange Rate Falls to Two-Year Lows after Poor UK Employment Data

Pound US Dollar

Pound US Dollar (GBP/USD) Exchange Rate Hits Lowest Point since Feb 2020

The Pound US Dollar (GBP/USD) exchange rate is tumbling lower today, hitting its lowest point since February 2020. Disappointing UK employment figures are likely pushing the currency pair lower. Additionally, further evidence that US inflation continues to run hot may also be dragging the exchange rate lower after today’s PPI figures.

At time of writing the GBP/USD exchange rate is at around $1.2073, which is down roughly -0.6% from this morning’s opening figures.

Pound (GBP) Drops as Wages Fall at Fastest Rate in Two Decades

The Pound (GBP) is losing ground against many of its rivals today. Poor employment data is likely dragging GBP lower today. Figures for April showed the country’s unemployment rate ticking higher to 3.8%, its first increase since late 2020.

The data also showed average wages falling at their fastest rate for more than two decades. The drop to pay comes as the UK’s cost-of-living crisis and record-high inflation continue to place pressure on household incomes.

The figures have dented overall confidence in the currency, as well as causing investors to pare back bets on action from the Bank of England (BoE). The central bank is expected to raise interest rates by 0.25% on Thursday. Fears that such a move could push the UK closer to a recession may cause them to reconsider, however.

The possibility of a UK-EU trade war may also be weighing on Sterling today. The EU has threatened legal action over the UK’s attempts to subvert elements of the Northern Ireland Protocol.

US Dollar (USD) Bolstered by Expectations of Aggressive Fed Rate Hike

The US Dollar (USD) is climbing higher today. The safe-haven ‘Greenback’ is seeing renewed bets amid a retreat to risk appetite. The shift in mood has largely been fuelled by worries that rising Covid-19 cases in China could prompt fresh lockdowns.

PPI figures today may also be helping to bolster USD. Goods makers and services companies saw their prices rise by 0.8% in May. The data has helped strengthen expectations of an aggressive interest rate hike from the Federal Reserve on Wednesday.

Naeem Aslam, Chief Market Analyst at Avatrade, said:

‘Another piping hot reading has increased the pressure on the Fed. Traders must embrace for a more hawkish monetary policy and odds are as high as they can be for an interest rate hike of 75 basis in tomorrow’s meeting.

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