Pound US Dollar (GBP/USD) Exchange Rate Plummets after Above-Forecast US Employment Figures
The Pound US Dollar (GBP/USD) exchange rate is plummeting today. The currency pair’s losses have come after US employment figures printed hotter than expected. Additionally, downbeat forecasts for the UK economy may also be weighing on GBP/USD today.
At time of writing the GBP/USD exchange rate is at around $, which is down around -1% from this morning’s opening figures.
US Dollar (USD) Rallies as Economy Returns to Pre-Pandemic Levels
The US Dollar (USD) has rallied today after the release of above-forecast employment data. Non farm payrolls rose by 528,000 versus a forecast rise of 250,000. The figures mean that the US job market has returned to pre-pandemic levels.
Guardian US business editor Dominic Rushe said:
‘Job growth was widespread, led by gains in leisure and hospitality, professional and business services, and healthcare.’
Unemployment also beat forecasts to fall to fresh lows of 3.5%, its lowest point since February 2020.
The figures are likely boosting USD due to renewed bets on a 0.75% rate hike from the Federal Reserve. After last week’s interest rate hike, Fed Chair Jerome Powell had signalled that further rate hikes would be ‘data-dependent’.
Pound (GBP) Slumps as UK Government Accused of Inaction Over Possible Recession
The Pound is slipping against its peers today. The losses for the currency are likely being prompted by the Bank of England’s (BoE) poor forecasts for the economy. The fresh predictions came alongside a 0.5% rate hike from the BoE on Thursday, its largest since 1997.
The BoE forecast that inflation would hit 13% by the end of 2022, likely pushing the UK into a fourth quarter recession. The predicted recession would be the worst since the 2008 financial crisis.
The impact of soaring costs for households and business may also be weighing on the currency today. The UK government has come under criticism for its seeming lack of action in the face of an intense cost-of-living crisis.
UK business secretary Kwasi Kwarteng stated that fresh support was unlikely to be seen before a new Prime Minister is selected on 5 September.
Speaking today, director general of the Confederation of British Industry (CBI) Tony Danker signalled his concern over the lack of action: ‘We need the current Prime Minister and the current Chancellor to fill that vacuum. We need them to make decisions. We need them to make plans.’