UK Exchange Rates Increase
Recently, the GBP/USD exchange rate surpassed previous records and climbed nearly to 1.2150. The exchange rate between the British pound and the euro (GBP/EUR) rose to 10-day highs above 1.1330 before leveling out close to 1.1315.
The dollar had a modest decline as the release of the most recent US inflation statistics drew closer, which caused the dollar index to drop to 102.60 and the GBP/USD exchange rate to rise to around 1.2200.
The UK Employment Report has improved
In the fourth quarter of 2022, the unemployment rate in the UK remained constant at 3.7%. Despite this, there were 1.036 billion total weekly hours, 16.6 million fewer than before the epidemic, a loss of 2.9 million.
Additionally, the rate of inactivity dropped significantly, from 21.7% to 21.4%. According to Simon French, chief economist of Panmure Gordon, this is a “tentative hint” of a change in the UK workforce’s early retirement rates owing to illness or personal preference.
Unfortunately, there has been a persistent decline in the number of open positions, which decreased by 76,000 in the most recent three-month period, marking the seventh consecutive decline and falling 13% below the high in May 2022. Even if there have been advances, fundamental flaws continue to be a source of worry.
Acceleration in Wage Earnings
The headline average wages rose by 5.9%, less than anticipated (6.2%), at a rate of 6.5%. However, the underlying growth jumped from 6.5% to 6.7%, above the 6.5% forecast.
Wages rose in the private sector by 7.3% while falling in the public sector by 4.2%. Despite the rise in profits, underlying salaries actually decreased 2.5% over the course of the year.
Labor conflicts cost employers 843,000 working days in December 2022, the most since November 2011. Haskel, a member of the Bank of England MPC, voiced worry about the possibility that rising inflation may permeate the economy and stressed the need of closely observing the statistics in the upcoming months due to the high degree of uncertainty.
Dollar drops when upcoming US inflation data is released.
The headline year-over-year rate is expected to dip to 6.2% from 6.4% and the core rate to 5.5% from 5.7%, according to projections. If inflation stays between 3-4%, some analysts think the probabilities are moving in favor of the Fed needing to take more action.
According to ING, the balance of risks for the dollar is weighted in its favor. However, tumultuous trading aside, negative data might potentially weaken the dollar and increase the GBP/USD exchange rate.