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Sterling tumbles to seven-week low as U.S. data boosts dollar
Published by Jessica Weisman-Pitts
Posted on February 5, 2024
3 min readLast updated: January 31, 2026
Global Banking & Finance Review®
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Published by Jessica Weisman-Pitts
Posted on February 5, 2024
3 min readLast updated: January 31, 2026
By Harry Robertson
LONDON (Reuters) -The pound fell to its lowest since mid-December on Monday as comments from Federal Reserve Chair Jerome Powell and strong economic data combined to boost the dollar.
Sterling was last down 0.8% at $1.2532, its lowest since Dec. 13 and on track for its biggest daily fall in around two months.
The euro was up 0.24% against the pound at 85.61 pence .
Data on Friday showed that U.S. job growth accelerated far more than expected in January and wage growth grew solidly. The figures caused investors to reconsider their bets that the Fed could cut rates in March, pushing up bond yields and the dollar.
Yields and the dollar were helped higher on Monday by comments from Powell, who said in an interview released on Sunday that the Fed would “give it some time” before cutting interest rates.
Survey data on Monday showed that the U.S. services sector picked up in January, further boosting the dollar and weighing on the pound.
The dollar index, which tracks the currency against major peers including the pound, was last up 0.45% at 104.52, the highest since Nov. 17.
Jane Foley, head of FX strategy at Rabobank, said the pound was losing ground to a resurgent dollar as traders reconsidered their Fed rate cut bets.
“Right now as the market prices out Fed rate cuts, cable’s likely to be at the bottom of the range,” she said, referring to the pound-dollar cross. “But once the Fed starts to cut we think it can go higher.”
The pound’s fall on Monday came despite some upbeat economic data. Figures showed that the unemployment rate was likely much lower late last year than previously thought, at 3.9% instead of 4.2%.
Separate survey data showed that British services businesses started 2024 on a robust footing, with a solid inflow of new orders and the fastest hiring in six months.
“While GBP/USD is a dollar story (today), price action in pound crosses seems inconsistent with the data flow, which by-and-large this morning has validated the BoE’s more cautious stance last week,” said Nicholas Rees, FX market analyst at Monex Europe.
The Bank of England held interest rates at 5.25% last week but opened up the possibility of cutting them as inflation falls.
(Reporting by Harry Robertson; Editing by Alex Richardson and Toby Chopra)
Foreign currency refers to the money used in other countries, which can be exchanged for the local currency. It is essential for international trade and travel.
Interest rates represent the cost of borrowing money or the return on savings. They are expressed as a percentage of the principal amount.
Economic growth is the increase in the production of goods and services in an economy over a period of time, typically measured by GDP.
The Federal Reserve is the central bank of the United States, responsible for monetary policy, regulating banks, and maintaining financial stability.
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