Analysis of the trend of the GBP sterling against the US dolla

On January 16, the global foreign exchange market fluctuated again. The US dollar fell under the influence of multiple factors, leading to a general strengthening of non-US currencies. However, although the US dollar exchange rate weakened on that day, it did not transmit to the pound, and the trend of the pound against the US dollar continued to remain weak.

On that day, the latest US retail sales data and initial jobless claims data performed poorly. Coupled with the impact of the latest speech by Federal Reserve Board Governor Waller, the US dollar index, which measures the US dollar against six major currencies, fell below the 109 mark and closed at 108.97 at the end of the foreign exchange market.

Specifically, data released by the US Department of Commerce on the same day showed that US retail sales in December 2024 increased by 0.4% month-on-month, lower than the market expectation of 0.5%, showing a slight lack of consumer momentum. On the same day, data released by the US Department of Labor showed that as of the week of January 11, the number of first-time unemployment claims in the United States increased by 14,000 to 217,000 month-on-month, exceeding the market’s general expectation of 210,000, exacerbating market concerns about the outlook for the US economy. Previously, the market remained cautious about the outlook for US inflation due to a strong job market and personal consumption.

At the same time, the speech by Fed Governor Waller on the same day also strengthened the market’s expectations that the Fed may cut interest rates in the future, thereby suppressing the US dollar exchange rate. Waller said that the Fed may implement interest rate cuts in the first half of this year, and even does not rule out the possibility of a rate cut in March. He also pointed out that if the economic data performance continues to be stable, there may be room for 3 to 4 rate cuts this year.

In this context, the reason why the pound is still weak, foreign exchange analysts at Societe Generale pointed out in a report that the decline of the pound against the US dollar is mainly due to the overall weakness of a number of economic data recently released by the UK relative to the United States, which has weakened the pound against the US dollar. In addition, officials from the Bank of England said on the 15th that in order to avoid a hard landing of the British economy, the Bank of England may consider cutting interest rates. This statement also led to market concerns that the Bank of England’s interest rate cuts would weaken the attractiveness of the pound, resulting in pressure on the pound exchange rate.