– Written by
David Woodsmith
STORY LINK GBP to USD Forecast: Pound Sterling Drops on Rising UK Unemployment
The Pound US Dollar (GBP/USD) exchange rate fell to its lowest level in a week on Tuesday following disappointing UK labour market figures.
At the time of writing, GBP/USD was trading near $1.3597, down approximately 0.3% compared with the start of the session.
Sterling came under notable pressure after fresh data revealed a sharp rise in UK unemployment, intensifying expectations that the Bank of England could soon move to lower interest rates.
According to the Office for National Statistics, the jobless rate climbed unexpectedly to 5.2% in December, marking its highest point in five years.
At the same time, wage growth cooled to its weakest pace since the three months to August 2024, adding to signs that momentum in the labour market is fading.
The combination of rising unemployment and softer pay growth heightened concerns about the durability of the UK economy and prompted markets to increase bets on a 25-basis-point rate cut at the Bank of England’s March meeting.
Although the US Dollar (USD) advanced against a softer Pound, it was largely confined to narrow ranges against most other major currencies on Tuesday.
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Trading conditions were relatively subdued at the start of the European session, as US markets had been closed the previous day for the President’s Day holiday.
With no major US data releases scheduled, investors had little fresh impetus to drive broader movement in the ‘Greenback’.
GBP/USD Forecast: Inflation Data and Fed Minutes in Focus
Looking ahead, attention will turn to the UK’s latest consumer price index figures due on Wednesday.
Forecasts suggest inflation will ease toward the 3% level. A cooler reading could strengthen expectations for additional policy easing beyond March and potentially extend Sterling’s losses.
Meanwhile, US Dollar traders will watch the release of minutes from the Federal Reserve’s first policy meeting of the year.
If policymakers signal caution about cutting rates due to lingering inflation risks, the US Dollar may find renewed support.
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TAGS: Pound Dollar Forecasts
