Image: Official White House Photo by Adam Schultz.
That's a 40-month best for Dollar buyers.
These are the best levels to buy dollars for those holding Pound Sterling in 40 months, thanks to another spike in the Pound to Dollar exchange rate that follows more soft U.S. economic data.
U.S. jobless claims rose to an eight-month high last week, according to data released Thursday. The figures follow a spate of soft numbers released midweek, which taken together builds a picture of an economy that is slowing down.
Initial jobless claims rose to 247K in the week ending May 31, from 239K, beating the consensus estimate for 235K.
"The further climb in the four-week average of initial claims to its highest level since late October is very hard to dismiss, as is the fact that unadjusted claims have been climbing at an average year-over-year pace of about 5% for a few months now, indicating that a gradual but genuine slackening of the labor market is underway," says Oliver Allen, an economist at Pantheon Macroeconomics.
Allen cites other survey numbers that point to a slowing U.S. labour market, including the April JOLTS report, which showed the economy’s lay-off rates have crept up a bit lately. Challenger job cut announcements for the private sector remain around the top of their post-2021 range in May.
"A relatively weak hiring rate means that the share of newly unemployed workers who are struggling to find a new job quickly is slowly creeping up too," says Allen.
The Dollar index - a measure of broader USD performance - edged towards its lowest level in two years following the jobless claims report.
The Pound to Dollar conversion rose to 1.36, its highest level since February 2022, while Euro-Dollar rose to 1.1494, helped in part by an ECB rate decision that suggest the Eurozone's central bank had completed its rate cutting cycle.
Above: GBP/USD extends a multi-month rally.
Nevertheless, the Dollar remains the dominant player in all these exchange rate pairings. The currency is struggling under the increasingly stagflationary conditions of falling economic activity and rising inflation.
The ISM services PMI, released Wednesday, confirmed this. It fell 1.7 points in May to 49.9, reflecting notable downswings in business activity and new orders, which were softer than the consensus forecast for 52.0.
Worryingly, the prices paid indicator rose further toward post-pandemic highs, confirming building inflationary pressures, which complicates the Federal Reserve's ability to respond to any economic slowdown with interest rate cuts.
"May's ISM services PMI points to worsening fallout from the tariffs on service sector activity, alongside further intensification of cost pressures that have been gathering steam for some time," says Jonathan Miller, an economist at Barclays.
The Federal Reserve would usually cut interest rates when the economy slows and labour market deteriorates. However, the Fed's hands will be tied by rising inflation, which is why 'stagflation' is an outright negative for markets, including the Dollar.
"The May ISM Services PMI sent a stagflationary signal, reinforcing the case for defensive positioning," says BCA Research.