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Pound US Dollar (GBP/USD) Exchange Rate Struggles even as US Jobless Claims Top 36 Million

May 14, 2020 - Written by Frank Davies

Latest Jump in US Jobless Claims Fails to Boost Pound US Dollar (GBP/USD) Exchange Rate

Another large weekly increase in US jobless claims was not enough to prevent the Pound Sterling to US Dollar (GBP/USD) exchange rate shedding further ground.

As initial jobless claims only saw an increase of 2.9 million, as opposed to the previous week’s increase of 3.1 million, markets were encouraged by the prospect of the labour market starting to stabilise.

While this uptick still takes the total increase in jobless claims since the start of the Covid-19 crisis to more than 36 million the US Dollar still held its ground on Thursday afternoon.

With the Federal Reserve having ruled out the possibility of negative interest rates the downside potential of USD exchange rates looked limited.

Signs of a fresh souring in relations between the US and China also encouraged a fresh wave of safe-haven demand, meanwhile.

As the White House suggested the possibility of fresh trade sanctions against China the risk of another damaging trade spat gave the US Dollar a solid boost across the board.

Caution from BoE Governor Weighs on Pound Exchange Rates

Comments from Bank of England (BoE) Governor Andrew Bailey put some renewed pressure on Pound Sterling, on the other hand.

As Bailey reiterated the risk of the UK economy suffering long term damage as a result of the pandemic lockdown demand for the Pound weakened.

With the economy already appearing on course to suffer a major slowdown in the first half of 2020 investors saw little incentive to buy into the Pound at this juncture.

Although the government has already outlined its plans to return the economy to its feet in the coming months GBP exchange rates continued to lack any real sense of optimism.

In the absence of any fresh UK data releases ahead of the weekend the GBP/USD exchange rate looks set to remain on the back foot.

US Dollar Bullishness Likely to Falter on Retail Sales and Manufacturing Production Disappointments

Even so, support for the US Dollar could still weaken ahead of the weekend if April’s retail sales figure shows as sharp a decline as forecast.

As long as sales plunge -12% on the month, reflecting the initial fallout of the Covid-19 crisis, USD exchange rates may lose some of their bullish momentum.

Confidence in the underlying health of the US economy could also deteriorate in response to April’s set of manufacturing and industrial production figures.

Confirmation that the manufacturing sector experienced a further decline in output at the start of the second quarter could drive selling pressure on the US Dollar, offering the GBP/USD exchange rate a potential rallying point.
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