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Pound US dollar (GBP/USD) exchange rate forecast: UK employment to dent GBP?

US Dollar Currency Forecast

The Pound US Dollar (GBP/USD) exchange rate is subdued this morning amid a data-light start to the week.

At the time of writing the GBP/USD exchange rate is trading at around $1.2527, virtually unchanged from this morning’s opening rate.

Pound (GBP) wavers amid data lull

The pound (GBP) is trading without a clear direction this morning amid a lack of macroeconomic releases. With data in short supply, last week’s upbeat GDP reports serve to keep Sterling afloat.

Looking ahead, the latest UK jobs reports are due for release tomorrow and could spark GBP volatility. Economists forecast that unemployment will have edged higher in March for a second consecutive month, reaching 2.4%. Signs of continual loosening in the UK’s labour market could see GBP slump against its rivals.

In addition to this, wage growth data is also due for release. Average earnings (excluding bonuses) are due to ease slightly to 5.9% in March’s three-month average. Signs of wage cooling may indicate wide UK disinflation, in turn reinforcing Bank of England (BoE) interest rate cut speculations and denting the pound.

Following this, a data-light calendar for the UK for the remainder of the week could see GBP trade in a wide range against its peers.

As the week draws to a close, a speech from BoE hawk Catherine L Mann may then fuel some GBP movement, with any pushback against interest rate cuts potentially lending Sterling some support.

US dollar (USD) subdued amid lack of data

The US dollar (USD) trading without a clear trajectory this morning as thin trading conditions stifle any notable movement.

Later today, speeches from Federal Reserve policymaker Loretta J Mester and Vice Chair Philip N Jefferson could imbue USD exchange rates with some movement. Following the Fed’s dovish shift in recent weeks, any further talks of monetary unwinding may see the ‘greenback’ slump.

On Wednesday, the latest US inflation data is due for release, with the weighty release likely to fuel significant USD fluctuations. Both core and headline inflation are expected to have eased in April’s annualised reading, dipping to 3.6% and 3.4%, respectively.  

Should the data print as forecast, ramped up Federal Reserve interest rate speculations could see USD tumble against its rivals, as inflation steadily approaches the Fed’s 2% target rate.

On Thursday, a forecast decrease in the latest initial jobless claims print could see USD post some modest gains amid signs of recovery in a recently weakening labour market.

However, USD’s upside may be capped by further commentary from Fed policymakers as the week draws nears an end, with any dovish rhetoric likely to sink the ‘greenback’.

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