Pound US Dollar (GBP/USD) Exchange Rate Edges Lower after Hotter-than-Forecast US Job Openings Figures

May 31, 2023 - Written by John Cameron

STORY LINK Pound US Dollar (GBP/USD) Exchange Rate Edges Lower after Hotter-than-Forecast US Job Openings Figures

Pound US Dollar (GBP/USD) Exchange Rate Trims Gains as Job Openings Beat Forecasts

The Pound US Dollar (GBP/USD) exchange rate edged lower on Wednesday. A unexpected increase in April’s US job openings increased Federal Reserve rate hike bets and pushed the pairing lower.

Additionally, a pullback in global risk appetite over the course of the day also kept pressure on GBP/USD.

At time of writing the GBP/USD exchange rate was at around $1.2394, which was down roughly 0.2% from that morning’s opening figures.

US Dollar (USD) Lifted by Above-Forecast Job Openings Figures

The US Dollar (USD) recovered lost ground over the course of Wednesday. A worsening risk appetite and surprise signs of a still-tight labour market lent support to the safe-haven ‘Greenback’.

The signals of robust demand in the US labour market came from an unexpected rise in April’s job openings. The US economy added 10.103m last month after three straight months of declines.

Analysts predicted that the data could add to the pressure on the Federal Reserve to raise interest rates in June. Markets are awaiting the higher-impact non farm payrolls figures on Friday for confirmation of the direction of the Fed’s forward policy.

Speaking on the job openings figures and labour market data, EY Chief Economist Gregory Daco said:

‘The job market continues to display resilience and durability, but evidence of softening conditions is mounting. Job openings are falling, job creation has become less diffuse across industries, more companies are reducing their employees' working hours, wage growth has begun to moderate, and layoffs are creeping higher.’

On the other hand, the US Dollar’s gains were capped by market anxiety over the US debt ceiling deal. The bipartisan deal aimed to lifted the US governments debt ceiling and averting a default is currently forecast to pass by a narrow margin.

Pound (GBP) Lifted by Bets on BoE Tightening

The Pound (GBP) edged higher on Wednesday although slipped against the US Dollar (USD). Sterling found support from persistent bets on additional policy tightening from the BoE.

Markets continued to price in up to 100bp of rate hikes from the central bank by November of this year. These bets were strengthened on Wednesday by hawkish comments from BoE policymaker Catherine Mann.

Speaking in a policy discussion conference on Wednesday, Mann said:

‘There is a gap between the headline, which is incorporating energy which went up really high and now has come down, and core where we do start to see the implications coming through pricing channels, through wage negotiations, into something that is persistent.’

GBP’s downside came amid a drop in business confidence, however. The Lloyds Bank Business Barometer dropped to 28% in May, its first fall in three months.

GBP/USD Exchange Rate Forecast: Will Cooler Jobs Data Prompt Fed Bet Pullback and Cause USD to Tumble?

Looking ahead for the US Dollar, output data for the US manufacturing sector could weigh on the ‘Greenback’ if Thursday’s figures print as expected. May’s manufacturing PMI is set to print a seventh consecutive month of contractions, close to three-year lows.

Also on Thursday, the latest jobless claims figures could help to cushion any losses off the back of May’s PMI. Claims are expected to rise which could point to a still-tight US labour market.

Friday’s jobs data will be keenly watched by USD investors for hints regarding the Fed’s potential forward policy. May’s unemployment is expected to tick higher to 3.5%, whilst non farm payrolls figures are expected to show that the US economy added 190,000 jobs in May. These signs of a cooling labour market could prompt a pullback in Fed bets and weigh on the US Dollar.

The Pound, meanwhile, will see relatively sparse data calendar over the rest of the week. The final reading of May’s manufacturing PMI on Thursday could pull GBP lower if it confirms a slowdown in the sector.

Aside from this, further movement in Sterling may be motivated by BoE rate hike bets.

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