- Sterling climbs, benefiting from a weaker dollar after disappointing US employment figures.
- Initial Jobless Claims rise to 217K, underscoring cooling US labor market despite Powell's openness to future policy easing.
- UK's economic growth forecasts bolster GBP, with Chancellor Hunt presenting optimistic projections for 2024 and 2025.
The Pound Sterling moderately advanced in the North American session on Thursday, as the Greenback remains on the defensive after a soft jobs report from the United States (US). Therefore, the GBP/USD trades at 1.2756, up 0.19%.
GBP/USD edges up on weak US economic data
US economic data is not helping the US Dollar, which is failing to gain traction following Federal Reserve Chair Jerome Powell's speech on Wednesday. Powell didn’t say anything dovish other than acknowledging that the Federal Reserve would ease policy “at some point this year,” though he emphasized that it would depend on data. He would speak again on Thursday at around 15:00 GMT.
In the meantime, the labor market is cooling. The Initial Jobless Claims for the week ending March 2 came at 217K, surpassing estimates and the previous reading of 215 K. Today’s data confirms Wednesday’s US Job Openings and Labor Turnover Survey (JOLTS), which revealed that there were 8.863 M job openings, which fell short of estimates and was lower than December’s 8.889M.
Other data showed that private hiring improved by 140K, less than forecasts of 150K. On Friday, the US Department of Labor will release the Nonfarm Payrolls for February, which are expected to rise by 200K, less than January’s 353K.
Across the pond, the UK’s Chancellor of the Exchequer, Jeremy Hunt, presented the spring budget to the House of Commons. Hunt stated the UK economy is estimated to grow by 0.8% in 2024 and 1.9% in 2025, stronger than the 0.7% and 1.4% growth rates forecast by the Office for Budget Responsibility (OBR) in November.
GBP/USD Price Analysis: Technical outlook
The GBP/USD resumed its uptrend following Powell’s speech and US economic data, with buyers targeting the 1.2800 figure. It should be said that Relative Strength Index (RSI) studies are bullish and not in overbought territory, an indication that the rally has legs. Above 1.2800, the next resistance would be the psychological 1.2850, followed by the 1.2900 mark. On the other hand, if sellers drag the exchange rate below the March 6 high of 1.2761, that could open the door for a correction. The next support would be today’s low at 1.2722, followed by the 1.2700 figure.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, aka ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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