– Written by
David Woodsmith
STORY LINK Pound Sterling to Dollar Forecast: GBP Slips after Soft UK Jobs Data
The Pound to Dollar (GBP/USD) exchange rate found support below 1.3600 on Friday and consolidated near 1.3600 on Tuesday after fresh UK labour market data weakened Sterling sentiment.
At the time of writing, the Pound to Euro exchange rate (GBP/EUR) traded at 1.14819 (-0.15%) while the Pound to Dollar exchange rate (GBP/USD) traded at 1.36001 (-0.2%).
Benign US inflation data had previously helped underpin equities and supported the Pound in global markets, but attention quickly shifted to UK data after the latest employment figures disappointed expectations.
Barclays noted the UK labour market report for December was soft, with headline earnings rising 4.2% versus consensus forecasts of 4.6%, while private sector regular pay held at 3.4% in line with Bank of England expectations.
The unemployment rate increased to 5.2% in the fourth quarter, above the 5.1% consensus and the highest level in nearly five years.
Sterling weakened following the release, with GBP/USD falling around 0.4% and EUR/GBP rising 0.3% as markets increased expectations for monetary easing. Traders now price around 21bps of Bank of England rate cuts for the March meeting compared with 17bps previously.
Expectations of faster or more substantial Bank of England rate cuts tend to undermine the Pound.
Save on Your GBP/USD Transfer
Get better rates and lower fees on your next international money transfer.
Compare TorFX with top UK banks in seconds and see how much you could save.
US Administration policy remains an important wildcard for currency markets. Markets will be monitoring the US Supreme Court with the possibility of a ruling on President Trump’s reciprocal tariffs later in the week, alongside a potential decision regarding the dismissal of Fed Governor Cook.
Even without a court ruling, MUFG expects tariff reductions; “A further reversal of some of the tariff hikes would help to ease inflation pressures, and create more leeway for the Fed to lower rates thereby encouraging a weaker US dollar.”
The headline US inflation rate declined to 2.4% for January from 2.7% the previous month and below consensus forecasts of 2.5%. Core prices increased 0.3% on the month with the annual rate at 2.5% from 2.6% and in line with expectations.
Markets are pricing in less than a 10% chance of a Fed rate cut in March, but just over a 70% chance of a move in June and the potential for at least two rate cuts this year.
GBP/USD Forecast: Pound Pressured after Soft UK Labour Data
The Pound faces further near-term pressure after weaker-than-expected employment data reinforced expectations of imminent policy easing.
The UK will also release inflation and PMI business confidence data later in the week. Any additional signs of slowing wage growth or softer activity could increase confidence that the Bank of England will begin cutting interest rates in the coming months.
ING commented on the broader outlook: “Britain, rain-sodden as ever, also shows flickers of optimism. Not on growth, which rounded out 2025 weaker than expected. Nor politics, which is a major banana skin for markets. But on inflation, there’s a growing sense that the Bank of England could go further with its cutting cycle than previously thought.”
Across the Atlantic, US data and tariff policy developments will remain important for direction. A weaker dollar could emerge if tariff reductions ease inflation pressures and allow the Federal Reserve greater flexibility to cut interest rates.
Overall, near-term GBP/USD direction will hinge on whether UK data continues to deteriorate faster than US conditions and how markets respond to evolving US trade policy.
International Money Transfer? Ask our resident FX expert a money transfer question or try John’s new, free, no-obligation personal service! ,where he helps every step of the way,
ensuring you get the best exchange rates on your currency requirements.
TAGS: Pound Dollar Forecasts
