- During yesterday's trading session, the GBP/USD pair rose by a third of a percent to reach 1.2744 after the US job quit rate fell.
- This signaled to markets that the US labor market is slowing down, which would ease wage pressures and boost the chances of a rate cut by mid-year.
- Broadly, the dollar was weaker on the day as a US jobs survey revealed that fewer people are leaving their jobs each month to pursue higher-paying opportunities.
- Overall, the gains in the GBP/USD exchange rate mean that the pound is now the best performing G10 currency alongside the dollar in 2024.
While Federal Reserve Chairman Jerome Powell's appearance before US lawmakers attracted media attention, the Job Openings and Labor Turnover Survey (JOLTs) report likely had a bigger impact on financial markets. ING analysts commented, "We are more interested in the job quit rate - the percentage of workers who leave their jobs to move to a new employer each month - and that has slowed to 2.1% from 2.2%. It had reached 3% in 2022." Moreover, the analysts explain that this slowdown suggests that while there are still many job vacancies, they are not particularly attractive, and the number of people interested in filling them is steadily decreasing.
The analysts added: "This has an indirect impact because if there is less churn in the labor market, there will be less need for employers to pay up to retain employees." "And the decline in the quit rate suggests that more heat is coming out of the labor market, with cost pressures easing further."
Currently, the JOLTs data suggests that the US jobs market is slowly stabilizing, in line with wages, and therefore inflation, with pressures easing without an alarming slowdown in net job creation and overall economic activity. A gradual, rather than pronounced, slowdown is likely to keep the Federal Open Market Committee (FOMC) comfortable waiting a little longer before starting to cut US interest rates.
Earlier, the GBP/USD pair rose to 1.2722 on Tuesday after data from the economic calendar showed that the US ISM services PMI reading came in at 52.6 in February, down from 53.4 in January and below consensus expectations of 53. Also, the composite index pointed to growth in February for the 14th consecutive month after a reading of 49% in December 2022, the first contraction since May 2020. At the same time, the employment index contracted for the second time in three months, to 48%, down 2.5 percentage points from 50.5% in January.
All eyes are now on the US nonfarm payrolls report, one of the highlights of the monthly US dollar calendar, as investors look for clear signs of a slowdown in the labor market. Finally, any weakness in the data could lead to further US dollar weakness.
GBPUSD Expectations and Analysis Today:
Since the middle of this week, the bullish momentum on the GBP/USD currency pair has been gaining strength significantly. As mentioned before, a stable move above the resistance at 1.2775 would serve as a strong catalyst for the bulls to turn the direction upwards. Technically, breaking the resistance at 1.2860 will be crucial for anticipating the future psychological resistance at 1.3000 successively. Moreover, this requires the announcement of weaker-than-expected US job numbers tomorrow and further investor risk appetite. Conversely, during the same time period, a move towards the support level at 1.2640 for the GBP/USD price would have a negative impact on the current upward rebound outlook.
Today, the US trade balance figures will be announced, followed by the second testimony of US Central Bank Governor Jerome Powell.
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