At the time of writing GBP/USD was trading at around $1.2980, down roughly 0.2% from Thursday’s opening rate.
The Pound (GBP) failed to catch bids on Thursday following the release of UK’s latest labour data.
The Office for National Statistics (ONS) reported that unemployment remained at 4.4% in June while average earnings (excluding bonuses) fell from 6% to 5.7%, coming in at the lowest level in an almost two-year period.
June’s fall in regular wage growth served to revive Bank of England (BoE) intrest rate cut bets for August, with the odds of a rate cut in August increasing from 35% to 40% in the wake of the release.
This ultimately weighed on GBP exchange rates on Thursday as the currency struggled to garner investor attention for the majority of the session.
Rob Wood, Chief UK Economist at Pantheon Macroeconomics commented: ‘Rate setters will breathe a sigh of relief after today’s labour market data, which leaves open the option to cut in August despite hot CPI services inflation. Rate setters will be encouraged by softer private sector pay growth in May, suggesting only small upside risks to their forecast for Q2 pay growth. We think an August rate cut is a very close call. The MPC could easily dismiss yesterday’s stronger-than-expected CPI services reading as volatile, just as they did in June, note slowing wage growth, and plough on with a rate cut in August.’
US Dollar (USD) Unmoved by Initial Jobless Claims
The US Dollar (USD) was largely muted on Thursday, unmoved by the publication of the latest US initial jobless claims.
The data printed above expectations, and confirmed 10,000 more citizens were claiming unemployment than expected, hitting a fresh weekly low.
Despite the underwhelming data release, the ‘Greenback’ managed to remain above ground, mostly unaffected by the latest release.
Elsewhere, risk-off flows failed to provide the safe haven currency some support, as the USD struggled to catch bids for the majority of the Thursday’s European session.
GBP/USD Forecast: UK Retail Sales in the Spotlight
Looking ahead, the primary catalyst of movement for the Pound US Dollar exchange rate for the remainder of this week will likely be the publication of the UK’s latest retail sales data.
The latest figure is forecast to print at -0.4% in June, and is expected to plummet from May’s 2.9% reading, and could hobble Sterling should the data serve to further fuel BoE rate cut bets.
Turning to the US Dollar, as significant domestic data is scarce for the remainder of the week, we may see USD trade directionless for the remainder of the week.
However, should Thursday’s cautious trade continue, USD could close the week on the front foot. Nevertheless, should an upbeat market mood prevail, USD exchange rates could be undermined towards the latter stages of the week.