The Pound Sterling to US Dollar (GBP/USD) exchange rate weakened by 0.50% as US jobless claims figures came in stronger than forecast.
According to the Washington based U.S. Department of Labor, the number of individuals filing for initial jobless benefits in the week ending January 24 decreased by 43,000 to 265,000 from the previous week’s total of 308,000.
Economists had expected initial jobless claims to decline by 8,000 to 300,000 last week.
Earlier the Pound Sterling to US Dollar (GBP/USD) exchange rate softened to trade in the region of 1.516 on Thursday.
After the Federal Reserve reiterated that it would be patient when determining when to raise interest rates, the US Dollar surged against the majority of its most traded peers. The Federal Reserve is now the only developed nation central bank still considering raising interest rates this year.
‘With central banks everywhere easing or shifting their biases in that direction, markets are highly sensitive to the global risk factors. What it does translate to is a desire to be in a safe asset such as the US Dollar,’ said Sam Tuck, a currency strategist from ANZ Bank New Zealand Ltd.
Fed policy makers said that they consider the recent turbulence in the global markets as relatively meaningless and delivered their most optimistic assessment of economic conditions since the recession. They highlighted strong job creation and solid economic growth but did acknowledge the slowdown in inflation, suggesting that it could weaken further if energy prices continue to drop.
‘Inflation is anticipated to decline further in the near term, but the Committee expects inflation to rise gradually toward 2% over the medium term as the labour market improves further and the transitory effects of lower energy prices and other factors dissipate,’ said the Fed in its statement.
Fed policy makers however reiterated that they are aiming to hike rates in the summer of this year. Economists are forecasting that the Fed will not raise interest rates until the end of the summer due to falling inflation.
The Pound meanwhile was softened by the release of soft domestic data which showed that house price growth in the UK slowed on an annual basis for a fifth consecutive month in January.
The report suggests that the threat from a bubble in the housing market is easing but also added to signs that the national economy is slowing.
Looking ahead to Friday’s session, we can expect the Pound to remain softer against the US Dollar as UK Mortgage Approvals data is likely to show a slight increase. The main point of interest for traders however will be the release of the latest US fourth quarter Gross Domestic Product (GDP) data.
The currency pair could also be influenced by data from the Eurozone.
