British Pound Surges to New 2024 High as Weak U.S. Labour Data Fuels Dollar Decline
GBP surged to a new high for 2024 against the USD after data revealed that the U.S. labour market was weaker than previously estimated, likely prompting the Federal Reserve to take action. The Pound-to-Dollar exchange rate climbed to 1.31 after the Bureau of Labour Statistics admitted it had overestimated job creation by 818,000 in the 12 months leading up to March 2024.
This boost pushed the best rate for international transfers above 1.3050, giving UK buyers of USDs their most favourable exchange rate since July 2023. The USD weakened across the board following the data release, as market expectations for Federal Reserve rate hikes increased. The Fed has indicated that it is closely monitoring labour market softness when considering potential rate cuts.
Before the data was released, the GBP/USD exchange rate had been struggling to break through a technical resistance around 1.30-1.3040. However, the new data and the subsequent market response might lead to a more decisive upward movement in the exchange rate. The market's reaction to the BLS payroll revision has caught many by surprise, as such revisions have typically gone unnoticed in recent years.
Strong UK Economic Outlook
GBP continues its upward momentum against most major currencies, buoyed by a risk-on sentiment in the markets. Investors are optimistic about the increasing likelihood of further monetary easing by the Federal Reserve following dovish minutes released yesterday. Today's focus is on the flash PMIs, which are expected to show that the UK economy remains strong in 2024.
GBP/USD is trading at its highest level in over a year, maintaining a bullish tone with a sustained break above its 200-week moving average. The pair has risen in 10 of the last 11 trading sessions and is hovering near $1.31—a level it has surpassed only four times in the past 522 trading days. FX options pricing suggests a 40% implied probability that GBP/USD will be above $1.32 by year-end, compared to a 25% chance of it falling below $1.28. However, the relative strength index (RSI) indicates overbought conditions, which could lead to a short-term pullback or consolidation.
Rate differentials continue to favour the Pound, with money markets anticipating fewer than two rate cuts by the Bank of England by year-end, compared to four expected from the Fed and three from the ECB. The Jackson Hole symposium, starting today, will offer further insights into the global monetary policy outlook as traders closely watch upcoming speeches by central bankers.
