Daily Exchange Rate Forecasts & Currency News
Pound Sterling to Dollar Forecast: Analyst Flags Weak Labour Trends as USD Risk
- Written by
David Woodsmith
Currency analysts remain cautious on the Pound to Dollar (GBP/USD) exchange rate outlook; however, UoB expects GBP/USD to stay trapped between 1.3360 and 1.3525, while ING notes shutdowns usually mean a weaker dollar but mixed equity signals.
Commonwealth Bank warns that prolonged political deadlock could accelerate USD losses, while MUFG highlights softening US labour trends as a risk for further volatility.
Congress was unable to pass the budget bills on Tuesday and the government shutdown is underway. Markets will be looking to assess the economic outlook, but the situation will now be complicated by the fact that key labour-market data scheduled for Thursday and Friday is likely to be postponed.
There is also a high degree of uncertainty surrounding the Administration’s response.
The dollar has edged lower, although the main beneficiary has been the yen rather than European currencies.
US equity futures have moved significantly lower, but UK equities have made net gains which has supported the Pound.
The Pound to Dollar (GBP/USD) exchange rate has secured a limited net gain to 1-week highs near 1.3475.
Key resistance for the pair remains at 1.3520.
UoB does not see evidence of a breakout yet and maintains that GBP/USD; “is likely to trade in a range between 1.3360 and 1.3525.”
ING commented; “Prior performance is no guarantee of future returns, but previous shutdowns have typically seen bullish steepening of the US yield curve, a slightly softer dollar and mixed news for equities.”
Joseph Capurso, head of foreign exchange at Commonwealth Bank of Australia added; "The USD will resume its fall today if the political discourse suggests an extended shutdown."
The latest US data recorded a decline in consumer confidence to a 5-month low and further evidence that jobs are harder to find.
MUFG commented; “the hiring rate slowed to 3.2%, the slowest pace since June 2024, indicating a slowdown in hiring activity. The quit rate ticked lower to 1.9% from 2%, potentially reflecting that people are less confident of finding jobs.”
ING commented; “A government shutdown will feed into those trends – especially if President Trump follows through with threats to fire and not just furlough non-essential government staff. Remember that as many as 150k government staff lay-offs may hit the October non-farm payroll result as part of DOGE's austerity drive earlier this year.”
Later in the day, the US will release the latest ADP jobs data and the ISM manufacturing confidence index.
Commonwealth Bank of Australia’s Capurso added "More weak U.S. economic data can add to the weight on the USD."
According to ING; “our team's core view remains that tariff-related goods price inflation will be softer than initially feared and that the softening in the labour market and rental trends means that services inflation is heading lower. That should allow the Fed to cut in October and December.”
Domestically, there has been relatively hawkish rhetoric from Bank of England officials with Mann, fore example, stating that the risk of higher and longer inflation is playing out.
Fiscal policy will also be a key element. There have been strong indications that Chancellor Reeves will lift the two-child benefit cap in the budget which will increase pressure for more substantial tax increases.
STORY LINK Pound Sterling to Dollar Forecast: Analyst Flags Weak Labour Trends as USD Risk
Currency analysts remain cautious on the Pound to Dollar (GBP/USD) exchange rate outlook; however, UoB expects GBP/USD to stay trapped between 1.3360 and 1.3525, while ING notes shutdowns usually mean a weaker dollar but mixed equity signals.
Commonwealth Bank warns that prolonged political deadlock could accelerate USD losses, while MUFG highlights softening US labour trends as a risk for further volatility.
Congress was unable to pass the budget bills on Tuesday and the government shutdown is underway. Markets will be looking to assess the economic outlook, but the situation will now be complicated by the fact that key labour-market data scheduled for Thursday and Friday is likely to be postponed.
There is also a high degree of uncertainty surrounding the Administration’s response.
The dollar has edged lower, although the main beneficiary has been the yen rather than European currencies.
US equity futures have moved significantly lower, but UK equities have made net gains which has supported the Pound.
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Key resistance for the pair remains at 1.3520.
UoB does not see evidence of a breakout yet and maintains that GBP/USD; “is likely to trade in a range between 1.3360 and 1.3525.”
ING commented; “Prior performance is no guarantee of future returns, but previous shutdowns have typically seen bullish steepening of the US yield curve, a slightly softer dollar and mixed news for equities.”
Joseph Capurso, head of foreign exchange at Commonwealth Bank of Australia added; "The USD will resume its fall today if the political discourse suggests an extended shutdown."
The latest US data recorded a decline in consumer confidence to a 5-month low and further evidence that jobs are harder to find.
MUFG commented; “the hiring rate slowed to 3.2%, the slowest pace since June 2024, indicating a slowdown in hiring activity. The quit rate ticked lower to 1.9% from 2%, potentially reflecting that people are less confident of finding jobs.”
Later in the day, the US will release the latest ADP jobs data and the ISM manufacturing confidence index.
Commonwealth Bank of Australia’s Capurso added "More weak U.S. economic data can add to the weight on the USD."
According to ING; “our team's core view remains that tariff-related goods price inflation will be softer than initially feared and that the softening in the labour market and rental trends means that services inflation is heading lower. That should allow the Fed to cut in October and December.”
Domestically, there has been relatively hawkish rhetoric from Bank of England officials with Mann, fore example, stating that the risk of higher and longer inflation is playing out.
Fiscal policy will also be a key element. There have been strong indications that Chancellor Reeves will lift the two-child benefit cap in the budget which will increase pressure for more substantial tax increases.
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