Pound sterling falls from 1.2680 as Middle East tensions worsen, hurting risk-sensitive currencies.
The pound sterling (GBP) fell dramatically to 1.2600 in Friday’s early American session. The GBPUSD pair falls as positive US Nonfarm Payrolls (NFP) statistics for March increases demand for the US dollar.
The US dollar recovers after good US nonfarm payrolls statistics.
The labor market data revealed that NFP for February were higher at 303K, compared to projections of 200K and the previous figure of 270K, which was revised downward from 275K. The unemployment rate falls to 3.8%, below estimates and the previous figure. of 3.9%. Annual hourly earnings increased by 0.3% month on month, as expected. Annual wage growth dropped to 4.1%, as expected, following a previous reading of 4.3%.
Strong labor demand, which leads to faster wage growth and increases inflation, would allow the Federal Reserve (Fed) to postpone rate cuts. Neel Kashkari, President of the Minneapolis Fed, said on Thursday that rate reduction would not be necessary this year if inflation remains stable. Kashkari also predicted two rate cuts for 2024 in the most recent dot plot.
Meanwhile, falling inflation predictions in the United Kingdom have weighed on the pound sterling. The most recent Bank of England (BoE) Decision Maker Panel (DMP) survey for February revealed that most enterprises saw selling prices and wage inflation easing down. over the following year. Selling price estimates fell to 4.1% from 4.3%, the lowest level in more than two years. Wage growth forecasts fell to 4.9% on a three-month moving average, from 5.2% in February.
A steep drop in UK inflation expectations boosts the BoE’s early rate cut hopes, impacting on the sterling.
Easing inflation expectations are expected to boost BoE rate cuts at the June meeting. The Pound Sterling is under pressure as expectations for early rate cuts from the Bank of England grow.
Daily Market movers: Pound Sterling falls while the US Dollar rises.
The pound sterling continues to fall to 1.2600 as market sentiment remains negative. Deepening Middle East tensions and lessening Federal Reserve rate cuts for June, following an excellent March NFP data, have boosted the US Dollar’s rebound.
The US Dollar Index (DXY) rebounded from a two-week low of 103.90. Seven members of Iran’s Islamic Revolutionary Guard Corps (IRGC) were killed by Israeli air strikes near Damascus, raising concerns about Iran’s direct involvement in the Israel palestine conflict.
Investors expect the Bank of England to cut interest rates in June due to lower inflation.
The pound declines as investors expect the Bank of England to cut interest rates in June due to lower inflation. BoE Governor Andrew Baily stated that market estimates for two or three rate cuts this year are reasonable, reinforcing expectations that the BoE will lower interest rates beginning in June.
Meanwhile, the United Kingdom’s soft Services PMI data for March, which was issued on Thursday, has influenced the economic outlook. The Services PMI dropped to 53.1, missing forecasts and the previous figure of 53.4. Tim Moore, Economics Director of S&P Global. Market Intelligence, in a statement, said: “The recovery in service sector output lost a little bit of momentum during March, and more so than suggested by the flash PMI results, but the overall picture remains reasonably positive.”
