ExchangeRates.org.uk - The Pound (GBP) was mostly rangebound on Tuesday as markets digested the UK’s latest jobs report. Data published by the Office for National Statistics (ONS) showed UK unemployment surprised to the downside in August as it fell from 4.1% to 4%, its lowest level since the start of the year. However, any resulting upside in Sterling was offset by the accompanying wage growth figures. The ONS reported average earnings (excluding bonuses) fell from 5.1% to 4.9% over the same period, With the Bank of England (BoE) keenly focused on the correlation between wages and inflation, August’s figures were taken as another sign the BoE is likely to cut interest rates when the bank next meets in November.
Susannah Streeter, head of money and markets at Hargreaves Lansdown (LON:HRGV), said: ‘Although wages are still beating inflation, this will still assuage concerns among [BoE] policymakers about the risk that consumer price rises will pop back up into troublesome territory.’
The US Dollar (USD) also traded sideways on Tuesday morning amid mixed impetus for the US currency. Offering support to the safe-haven ‘Greenback’ were ongoing geopolitical tensions and continued disappointment from China that Beijing hasn’t been more forthcoming in announcing fiscal stimulus measures. However, any upside in the US dollar remained limited as markets continue to price in another Federal Reserve interest rate cut next month.
GBP/USD Exchange Rate Forecast: Cooling UK Inflation to Sink Sterling?
Looking ahead, the Pound to US Dollar exchange rate may face notable headwinds on Wednesday as the UK publishes its latest consumer price index. September’s CPI figures are expected to report inflation began to cool again at the end of the third quarter. Economists forecast UK inflation will have slowed from 2.1% to 1.9% last month. If correct, this will mark the first time inflation has fallen below the BoE’s 2% target since April 2021, which may weigh heavily on the pound if it stokes expectations the bank will deliver consecutive rate cuts in November and December. Meanwhile, with US economic data in short supply, movement in the US dollar on Wednesday may be dictated by market risk appetite. Will a cautious mood strengthen USD demand?
This content was originally published on ExchangeRates.org.uk