Pound US Dollar (GBP/USD) Exchange Rate Jumps, Eases on Mixed UK Data

February 15, 2022 - Written by John Cameron

STORY LINK Pound US Dollar (GBP/USD) Exchange Rate Jumps, Eases on Mixed UK Data

GBP/USD Exchange Rate Wavers above Opening Levels on UK Jobs Data

The Pound US Dollar (GBP/USD) exchange rate is trending up this morning, having risen earlier in the session before dropping on mixed UK jobs data. Easing risk sentiment is also influencing trading, as Russian troops are reported to be withdrawing from the Ukrainian border.

At the time of writing, GBP/USD is trading at $1.3549, up slightly on today’s opening levels.

Pound (GBP) Fluctuates as Investors Digest Wage Growth

The Pound (GBP) is trading mixed this morning as an increase in average earnings met with a varied response.

Average earnings increased by 4.3% year-on-year as opposed to the 3.8% anticipated, but analysts were quick to point out that despite rising wages, escalating inflationary pressures mean that UK households are still worse off.

Sam Beckett, the head of economic statistics at the Office for National Statistics (ONS), clarified: ‘After taking account of recent rises in consumer prices, real total pay fell in the year to October-December 2021, despite a strong recovery in bonuses.’

The Bank of England (BoE) warned earlier this month that UK inflation is expected to climb above 7% by April before easing off, leaving households facing the worst squeeze on their disposable incomes for at least 30 years.

According to the TUC’s General Secretary Frances O’Grady:

‘Pay packets are plummeting in value as bills and prices sky-rocket. This huge pressure on household budgets will only get worse unless the government takes proper action… After the longest wage squeeze in more than 200 years, Britain urgently needs a pay rise.’

Nevertheless, the number of employees on UK company payrolls increased by 108,000 in January to a record 29.5 million – a sign of increasing confidence among firms.

Rishi Sunak, the Chancellor of the Exchequer, commented that the latest figures showed the jobs market was healthier than most could have hoped for in the fallout from Covid-19.

US Dollar (GBP) Dented by Easing Risk Sentiment

The US Dollar (USD) is sinking against several peers this morning following an increase in strength through yesterday’s session on risk-off tailwinds.

Risk appetite is improving today, following an announcement that Russia is withdrawing some of its forces from the Ukrainian border. Citing Russia’s military, Interfax commented that ‘a number of drills have finished… some units of western and southern military districts have started returning to bases.’

The move aligns with comments made yesterday by Russian foreign minister Sergey Lavrov, who suggested that there was still a path for diplomacy. Lavrov has repeated those remarks today, emphasising that Moscow is ready for separate talks on intermediate-range nuclear missiles as part of its security dialogue.

According to SkyNews correspondent Diana Magnay, Russia’s retreat is a concrete step towards de-escalation from the Russian leadership.

‘Of course the Russians don't want it to look like they're backing down,’ Magnay comments. ‘The Russian parliament has adopted a draft resolution to recognise the separatist republics in Donbas as independent. It… mean[s] they could back away from all this war hype with something to show from it.’

Yet, the US Dollar may still find some support on account of its safe-haven status. It’s only the beginning of the drawdown: there could be up to 130,000 Russian troops around the Ukrainian border still.

The UK's foreign secretary has said Russia must remove all its troops from the Ukrainian border to prove it has no plans to invade, as Ukrainian Foreign minister Dmytro Kuleba remarks ‘When we see a withdrawal, we will believe in a de-escalation.’

GBP/USD Exchange Rate Forecast: US Manufacturing Data to Influence Trading?

Looking ahead, Russian military activity is likely to continue influencing the Pound US Dollar exchange rate.

Elsewhere, US manufacturing data could affect USD exchange rates: the NY Empire State manufacturing index is expected to reveal an increase in February’s manufacturing activity, potentially boosting the ‘Greenback’.

Furthermore, January’s US producer price index is expected to reveal a monthly increase – albeit marginal – in inflation, supporting the Federal Reserve Bank’s aggressive policy tightening strategy.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Dollar Forecasts