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Pound US Dollar (GBP/USD) Exchange Rate Muted in Anticipation of US Initial Jobless Claims Data

January 14, 2021 - Written by Frank Davies

Pound US Dollar (GBP/USD) Exchange Rate Under Pressure Ahead of Jobless Claims Data

The Pound to US Dollar (GBP/USD) exchange rate struggled to find any particular traction ahead of the latest US initial jobless claims data.

With market risk appetite elevated once again, thanks to improved Chinese trade data, the US Dollar saw limited gains against its rival.

However, if the first jobless claims data of 2021 shows that a smaller increase in claims on the week this could give USD exchange rates a boost.

Any signs of a stabilising labour market could encourage the US Dollar to push higher against its rivals once again, especially as investors anticipate further fiscal stimulus measures to come.

Lingering worries over Covid-19 continued to limit demand for the Pound, on the other hand, as worries over the UK economic outlook persisted.

Negative UK Gross Domestic Product Forecast to Drive Pound Lower

The appeal of the Pound looks set to weaken further ahead of the weekend with the release of November’s UK gross domestic product report.

Forecasts point towards growth contracting sharply on both the month and the year, highlighting the impact of the second national lockdown.

If monthly growth slumps -5.7% as anticipated this would sharply increase the odds of a fourth quarter GDP contraction, leaving GBP exchange rates exposed to fresh selling pressure.

As long as investors see reason to bet that the UK will experience a double-dip recession the strength of the Pound is likely to diminish.

Unless the GDP report demonstrates any signs of resilience the GBP/USD exchange rate may end the week on the back foot.

A narrowed November trade deficit could help to limit the extent of any Pound downtrend, though, as worries over the trade outlook diminish.

Stabilising US Retail Sales Set to Shore up US Dollar Exchange Rates

USD exchange rates could find a fresh rallying point on Friday, meanwhile, with forecasts pointing towards an improved month of retail sales.

If December’s retail sales show stagnation as forecast this could lift the US Dollar against its rivals, given the negative nature of November’s data.

Evidence that consumer spending at least started to stabilise in the final month of 2020 could encourage some level of confidence in the economic outlook.

On the other hand, if the latest industrial and manufacturing production figures fail to show an uptick in momentum on the month this may limit any potential US Dollar gains.

Signs of lingering weakness within the manufacturing sector may cast a shadow over the US outlook, helping to keep a floor under the GBP/USD exchange rate for the time being.
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