GBP/USD pressured by stronger US dollar

The GBP/USD pair is under pressure due to the resurging US dollar that is being boosted from stronger-than-forecast US economic data, underpinning the hawkish Fed’s outlook and higher rate expectations for 2023.

The Dollar Index (DXY), an index that measures the American currency against a basket of rival currencies has rallied into the 104.50s from the 103.75 low although it is still below the highs for the month near 107.20.

Thursday’s data indicated the US weekly jobless claims rose less than expected. The Department of Labour announced seasonally adjusted numbers of initial unemployment claims increased by 2,000 to 216,000 in the week ending on December 17 versus the expected 225,000. The previous week’s level was revised up by 3,000 to 214,000. The four-week moving average tallied 221,750, sliding by 6,250 from the previous week’s revised average of 228,000. Unadjusted claims declined 4,064 on a weekly basis to 247,867.


The dollar was in demand following the numbers as these is the type of data that could keep the Fed’s hawkish for longer. The Fed last week projected at least an additional 75 basis points of increases in borrowing costs by the end of 2023.

While job growth is clearly slowing, it is not enough to impact unemployment and so traders continue to believe that the Fed will have to do more than the market is expecting.”

The UK reported third-quarter current account and final Gross Domestic Production data. The QoQ growth rate was marked down a tick to -0.3%, while the YoY was revised to 1.9% vs. 2.4% preliminary. Private consumption, government spending, and investment were all marked down significantly, but this was partially offset by stronger net exports. The Bank of England’s tightening expectations are still passive and a 50-bp hike is expected in February.