Can the Pound end its three-day slide as UK jobs and inflation data loom?

GBP/USD hits a four-week low as losses extend into a third consecutive day.
With a December Fed rate hike fully priced in, UK output exceeds expectations.
Tuesday brings UK employment data, followed by October inflation on Wednesday.

The Pound remains under pressure against the Dollar for a third consecutive day, despite stronger UK growth, as markets fully price in a December Fed rate hike. Trading near 1.3250, GBP/USD has retreated from Monday's close just below 1.3450. Thursday's trough marks the pair's weakest level since October 15.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Futures assign about a 90% probability to a quarter-point Fed rate increase on December 9, with the remaining probability attached to a half-point rise, after US October inflation exceeded forecasts on November 10. Speaking on Thursday, Cleveland Fed President Hammack said policy needs to become restrictive, but opposed a half-point increase. At 4.00%, the UK's Bank Rate matches the upper end of the Fed's 3.75%-4.00% range. A Fed increase without a matching move by the Bank of England (BoE) would therefore take US rates above those in the UK.

Despite three of Thursday's five UK data releases exceeding forecasts and the remaining two meeting expectations, GBP/USD subsequently slipped to a four-week low. Third-quarter UK Gross Domestic Product (GDP) growth accelerated from 0.5% to 0.7%, in line with forecasts, while September's 0.2% rise surpassed expectations of no growth. On November 5, the BoE voted 8-1 to raise its rate to 4.00%; the sole dissenter favoured a half-point increase. Markets price the probability of a second hike on December 17 at close to 80%.

Which releases are next on the calendar?

Ahead of the BoE's December 17 decision, the UK will release employment figures and October inflation data. The jobs report is scheduled for 07:00 GMT on Tuesday, November 17, following an unemployment rate of 4.7% and pay growth excluding bonuses of 3.7%. Inflation data are due at 07:00 GMT on Wednesday, November 18, after September's reading of 3.5%.

At 13:30 GMT on Friday, US October producer price data are due, with monthly core inflation projected to ease from 0.7% to 0.3%. Due at 19:00 GMT on Wednesday, November 18, the minutes of the Fed's October meeting will also have a bearing on whether the December 9 rate increase is a quarter-point or a half-point.

What does the chart show?

GBP/USD is back within the 1.3200-1.3300 range that held from late September to mid-October. Over three days, the decline has erased roughly three-quarters of the advance from the October 14 low near 1.3150 to the 1.3500 highs reached on November 4 and 5. Of the past six sessions, only Monday's rebound delivered a gain.

Daily chart: GBP/USD

Pound Sterling: Frequently Asked Questions

What should you know about the Pound Sterling?

As the United Kingdom's official currency, the Pound Sterling (GBP) is also the world's oldest, dating back to 886 AD. According to 2022 data, it ranks fourth globally for foreign exchange (FX) trading, representing 12% of transactions with an average daily value of $630 billion. Among its main trading pairs, GBP/USD, also called ‘Cable’, represents 11% of FX trading. GBP/JPY, known to traders as the ‘Dragon’, accounts for 3%, while EUR/GBP contributes 2%. Responsibility for issuing the Pound Sterling rests with the Bank of England (BoE).

Why do Bank of England decisions matter for the Pound Sterling?

Monetary policy set by the Bank of England is the most important influence on the Pound Sterling's value. In making its decisions, the BoE assesses progress towards its main objective of “price stability” – inflation holding steady at around 2%. Adjusting interest rates is its principal means of meeting that objective. To curb excessively high inflation, the BoE seeks to raise borrowing costs for households and businesses by increasing interest rates. GBP generally benefits, since higher rates make the UK a more attractive destination for international investors' funds. By contrast, inflation that falls too low signals a slowdown in economic growth. The BoE will then consider cutting interest rates to make credit cheaper, encouraging businesses to borrow more for investment in projects that generate growth.

Why does economic data matter for the Pound's value?

By showing the state of the economy, data releases can affect the Pound Sterling's value. GDP, Manufacturing and Services PMIs, and employment figures are among the indicators that can shape GBP's direction. Sterling benefits from a robust economy, which draws greater foreign investment and may also prompt the BoE to raise interest rates, directly strengthening GBP. Conversely, weak economic readings are likely to weigh on the Pound Sterling.

Why is the Trade Balance important for the Pound?

The Trade Balance is another major release relevant to the Pound Sterling. Over a specified period, it compares a country's export earnings with its expenditure on imports. Strong demand for a country's exports supports its currency through the additional demand from overseas buyers purchasing those goods. A positive net Trade Balance consequently strengthens the currency, while a negative balance has the opposite effect.