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Pound US Dollar (GBP/USD) Exchange Rate to Tumble on Falling US Jobless Claims, Fed Optimism?

Pound US Dollar Exchange Rate to Sink Lower on Upbeat US Data?

The Pound US Dollar (GBP/USD) exchange rate is currently trending down as risk-off headwinds draw investors towards the safe-haven dollar and away from riskier assets. The Pound (GBP) is also subdued by rising cases of the Omicron variant and the subsequent implementation of Plan B measures.

At the time of writing, GBP/USD is trading at $1.3180, down 0.2% from today’s opening levels.

US Dollar (USD) to Benefit from Upbeat Jobs Data?

The US Dollar (USD) is supported against its peers today amidst a cautious market mood.

Also buoying the ‘Greenback’ are expectations of a tightening labour market – today’s jobless data is expected to reveal a further decrease in the number of people registering for unemployment benefits.

The USA’s unemployment rate fell to 4.2% in November, as revealed by the US Bureau of Labour Statistics last week. Capping gains though, the US economy only added 210,000 jobs – less than half of economists’ expectations.

The JOLTs report published on Wednesday subsequently showed a steady decline in layoffs, while the number of people voluntarily quitting their jobs fell.

Also boosting the US Dollar is speculation over imminent policy tightening measures from the Federal Reserve. The Fed is expected to accelerate its tapering measures when it meets next week, amidst elevated US inflation and hawkish commentary from central bank officials.

According to the Washington Post:

‘The taper isn’t all that will be on the agenda at next week’s meeting – Fed officials are also likely to signal a faster and larger tightening of monetary policy over the next three years.’

Pound (GBP) to sink further on UK Covid Headwinds?

The Pound (GBP) is trading in a mixed range following the introduction of Plan B measures in the UK to tackle the spread of coronavirus. New restrictions include mask-wearing, Covid passes and home-working where possible.

The new measures face criticism from the public and politicians alike, as political tensions escalate in Parliament over rumours of a secret party attended last year by government officials, when such gatherings were banned.

Nevertheless, several officials are defending the restrictions, arguing that ‘compliance is for the health and safety of you, your loved ones and the country… even if you feel angry with a politician just now.’

Looking ahead, further Covid developments are likely to direct Pound movement given a lack of significant UK data today. Into tomorrow, UK GDP data may dent Sterling sentiment, as economic growth is expected to have slowed in October.