– Written by
Frank Davies
STORY LINK GBP/USD Forecast: UK Jobs Data Could Decide Pound Sterling’s Next Move
The Pound to US Dollar (GBP/USD) exchange rate made little headway at the start of the week, with investors reluctant to take significant positions ahead of several important UK economic releases.
At the time of writing, GBP/USD was trading at approximately $1.3321, broadly unchanged from Monday’s opening levels.
Sterling struggled to find a clear direction on Monday as investors looked ahead to a busy week for UK economic data.
Tuesday’s labour market report and Wednesday’s inflation figures are expected to be particularly important, with both likely to influence expectations for the Bank of England’s (BoE) next interest rate decision.
As the final employment and consumer price index (CPI) readings before November’s policy meeting, the figures could help determine whether the BoE delivers another 25-basis-point rate increase next month.
Evidence of persistent inflation or resilient wage growth would strengthen the case for further tightening, while signs that the economy is cooling could make policymakers more reluctant to raise borrowing costs.
With the outlook finely balanced, Sterling traders appeared unwilling to make significant moves ahead of the releases.
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The US Dollar (USD), meanwhile, faced some pressure on Monday as continued concerns over the recent sell-off in artificial intelligence (AI) stocks weighed on sentiment towards US assets.
Investors have become increasingly concerned about whether the enormous sums being invested in AI infrastructure will generate sufficient returns.
Questions have also emerged over how heavily indebted data-centre operators will finance their expansion plans, particularly if borrowing costs remain elevated.
The uncertainty has added to doubts over whether the Federal Reserve will continue raising interest rates.
Some investors believe further tightening could put additional strain on the technology sector, which has become an increasingly important source of investment and growth in the US economy.
These concerns helped limit demand for the Dollar, although the currency avoided more substantial losses.
Near-Term GBP/USD Forecast: UK Jobs Data Could Test Sterling’s Recovery
Tuesday’s UK employment figures could provide the first major test for the Pound to US Dollar exchange rate this week.
Economists expect the latest report to show unemployment increased again in the three months to August, while wage growth is forecast to have slowed.
A weaker labour market would reduce pressure on the Bank of England to raise interest rates in November, potentially leaving Sterling vulnerable to renewed selling.
However, stronger-than-expected employment or earnings figures could reinforce expectations of another rate increase and help GBP/USD build on its recent recovery.
Across the Atlantic, the latest weekly ADP employment figures may also influence trading.
Evidence of continued resilience in US private-sector hiring could offer the Dollar some support by strengthening expectations that the Federal Reserve has room to maintain a restrictive policy stance.
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TAGS: Pound Dollar Forecasts
