📈 Fed's first cut since 2020: Time to buy the dip? See Tech-focused stock picksUnlock AI Picks

Sterling tumbles to seven-week low as U.S. data boosts dollar

Published 05/02/2024, 11:27
Updated 05/02/2024, 15:31
© Reuters. Pound and U.S. dollar banknotes are seen in this illustration taken January 6, 2020. REUTERS/Dado Ruvic/Illustration
GBP/USD
-
DX
-

By Harry Robertson

LONDON (Reuters) -The pound fell to its lowest since mid-December on Monday as comments from Federal Reserve Chair Jerome Powell and strong economic data combined to boost the dollar.

Sterling was last down 0.8% at $1.2532, its lowest since Dec. 13 and on track for its biggest daily fall in around two months.

The euro was up 0.24% against the pound at 85.61 pence .

Data on Friday showed that U.S. job growth accelerated far more than expected in January and wage growth grew solidly. The figures caused investors to reconsider their bets that the Fed could cut rates in March, pushing up bond yields and the dollar.

Yields and the dollar were helped higher on Monday by comments from Powell, who said in an interview released on Sunday that the Fed would "give it some time" before cutting interest rates.

Survey data on Monday showed that the U.S. services sector picked up in January, further boosting the dollar and weighing on the pound.

{{2126|The dodollar index, which tracks the currency against major peers including the pound, was last up 0.45% at 104.52, the highest since Nov. 17.

Jane Foley, head of FX strategy at Rabobank, said the pound was losing ground to a resurgent dollar as traders reconsidered their Fed rate cut bets.

"Right now as the market prices out Fed rate cuts, cable's likely to be at the bottom of the range," she said, referring to the pound-dollar cross. "But once the Fed starts to cut we think it can go higher."

The pound's fall on Monday came despite some upbeat economic data. Figures showed that the unemployment rate was likely much lower late last year than previously thought, at 3.9% instead of 4.2%.

Separate survey data showed that British services businesses started 2024 on a robust footing, with a solid inflow of new orders and the fastest hiring in six months.

© Reuters. Pound and U.S. dollar banknotes are seen in this illustration taken January 6, 2020. REUTERS/Dado Ruvic/Illustration

"While GBP/USD is a dollar story (today), price action in pound crosses seems inconsistent with the data flow, which by-and-large this morning has validated the BoE's more cautious stance last week," said Nicholas Rees, FX market analyst at Monex Europe.

The Bank of England held interest rates at 5.25% last week but opened up the possibility of cutting them as inflation falls.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.