Underwhelming US Payrolls Report Fails to Boost GBP/USD Exchange Rate
UPDATE: Demand for the US Dollar (USD) diminished sharply in the wake of February’s non-farm payrolls report, which fell significantly short of forecast.
As only 20,000 new jobs were added to the US economy in February, as opposed to the expected 180,000, this raised concerns over the outlook of the labour market.
However, as the unemployment rate improved on the month and Brexit worries persisted the Pound Sterling to US Dollar (GBP/USD) exchange rate remained on a weaker footing.
With neither side willing to change its position on the Irish backstop investors saw little reason to buy into the Pound.
Pound Sterling US Dollar (GBP/USD) Exchange Rate Softens as Brexit Worries Persist
A continued lack of progress surrounding Brexit limited the strength of the Pound Sterling to US Dollar (GBP/USD) exchange rate this morning.
With officials still at odds over the issue of the Irish border, and with no imminent resolution in sight, the mood towards Pound Sterling (GBP) remained generally bearish.
As less than a month remains before the Brexit date, the lack of a final agreement continues to weigh on investor sentiment, keeping GBP exchange rates biased to the downside.
With the UK economy already showing signs of slowing in the face of Brexit anxiety this lack of clarity looks set to weigh on the Pound for some time to come.
Tightening US Labour Market to Drive GBP/USD Exchange Rate Downtrend
The GBP/USD exchange rate may come under greater pressure this afternoon if February’s US labour market data proves positive.
After January’s strong uptick in the headline non-farm payrolls figure, investors anticipate a moderate decline on the month, with around 180,000 jobs added to the US economy.
However, forecasts point towards the unemployment rate improving from 4.0% to 3.9% on the month, highlighting a continued tightening within the US labour market.
While even a solid improvement here is unlikely to alter the current monetary policy outlook of the Federal Reserve a positive showing could still shore up the US Dollar (USD).
Signs of resilience within the US economy would offer USD exchange rates a rallying point ahead of the weekend, even as worries over the health of the global economy mount.
Retail Sales Rebound Forecast to Boost US Dollar (USD) Exchange Rates
A rebound in US advance retail sales could give the US Dollar a fresh boost next week, with investors hoping to see a reversal of the previous month’s sharp contraction.
After the -1.2% slump in sales seen in January investors are looking for a return to growth, signalling a more positive outlook among US consumers.
If sales fail to pick up this would leave the US Dollar vulnerable to a fresh sell off, as confidence in the outlook of the US economy still looks rather fragile.
Evidence of increased confidence and spending among US consumers, though, would offer USD exchange rates a renewed bout of momentum.
Pound Sterling (GBP) Vulnerable Ahead of UK Trade and Production Data
Tuesday’s raft of UK trade and production data may encourage GBP exchange rates to lose further ground, meanwhile.
As forecasts point towards a continued contraction in manufacturing and industrial production the Pound could struggle to find cause for confidence.
Unless January’s trade deficit narrows further than forecast the GBP/USD exchange rate looks set to extend its latest downtrend.
The UK’s latest gross domestic product data could also offer a rallying point to the Pound, provided that growth does not show any fresh signs of slowing.
A resilient performance from the UK economy in January would help to put a floor under the GBP/USD exchange rate, limiting the negative impact of further Brexit-based uncertainty.