After the job creation figures were released, the British Pound (GBP) is falling a little more steadily. This comes as little surprise, as the economic recovery is still in its early stages and many Brits are still feeling the effects of the recent job losses.
Even though many are optimistic, the British Pound has suffered a minor but significant decline. As with most currencies, the British Pound (GBP) has not been doing very well. For the past month, the British Pound has traded in a narrow range between sixty and seventy US dollars. At this time, the markets have stabilized and the GBP/USD is looking like it will continue to go lower.
The recent jobs report has failed to inspire confidence in the global economy. The numbers are down significantly from the end of 2020 and seem to have hit rock bottom. Furthermore, the unemployment rate is still at levels that many people would consider to be “double-digit” levels.
Meanwhile, the British Pound is looking weak as a result of this decline. People are still hopeful and believe that the government will do everything possible to get people back to work. The great news is that many British citizens are still employed. However, the job loss has also hit business in the United Kingdom.
The upshot is that the numbers for job creation are being met with mixed reactions. The Labor Force Survey (LFS) indicates that about 40% of the labor force is unemployed and at risk of losing their jobs. While this may still be a good number, many are waiting to see if the government will announce some sort of stimulus package or tax increase.
The impact of the LFS and the Bank of England’s monetary policy have been felt internationally as a result of the weak trade and foreign exchange rates. The impact on the U.K. economy has been quite significant.
For example, many businesses in the United Kingdom are hedging their positions against EUR/GBP and other currencies. This will help them protect themselves against market risks. If EUR/GBP drops significantly, hedgers will be forced to cover their positions and that means that they will lose money on those hedges.
The British Pound is currently trading at around eighty to one hundred U.S. dollars. Since many Brits are still hopeful, the currency can still rise a little bit higher. However, at this point the weakening effect is quite substantial.
If the British economy continues to experience more job losses and even more unemployment, the impact will be felt on the British Pound. As long as the country is struggling, this weak currency is a viable currency to buy. However, the final analysis is that it is going to take a while before it recovers any significant value.
The weakness of the British Pound is forcing currency traders to make educated guesses about what currency to buy. The Bank of England has helped to stabilize the British economy, but many do not expect it to be able to stabilize the European economy as well. Many think that European governments may finally agree to a plan to tighten the credit and currency markets.
If this occurs, the effect on the currency market should be quite severe. It is only a matter of time before a big correction occurs. For now, the currency markets are showing signs of life and optimism.
The future for the British Pound is still in question. Even though many believe that the British economy is showing signs of stability, the outlook for the pound remains murky.