Pound Sterling US Dollar (GBP/USD) Exchange Rate Slumps as US Job Data Impresses
UPDATE: The Pound Sterling US Dollar (GBP/USD) exchange rate slumped by around -0.4% near the end of Friday’s session. The pairing is currently trading at around $1.3102.
The highly anticipated US non-farm payrolls data revealed that job growth increased by the most in 10 months.
An increase in jobs in November was due to striking workers from General Motors returning to work and a boost in healthcare industry hiring.
This was the strongest sign yet that the US economy is not in danger of stalling, and next week will likely see the US Federal Reserve focus on the economy’s resilience.
The US unemployment rate also fell back to 3.5%, buoying the ‘Greenback’ as this suggests consumers will continue to drive economic expansion, which is currently the longest in history in its 11th year.
Pound Sterling US Dollar (GBP/USD) Exchange Rate Falls Ahead of US Jobs Data
The Pound Sterling US Dollar (GBP/USD) exchange rate slumped by around -0.3% at the end of the week. The pairing is currently trading at around $1.3117.
Today saw the ‘Greenback’ headed towards its worst week since October today, weighed down by trade tensions and a weak US economy.
Investors worried today’s US jobs data may fall short of expectations and there is less than a week until the UK election.
However, this did little to stop the US Dollar from clawing back losses from the Pound’s recent rally.
Meanwhile, markets are bracing themselves for next week, which will see both a British general election and a US Federal Reserve meeting.
Commenting on this, Richard Franulovich, head of FX strategy at Westpac noted:
‘There is a lot of event risk to navigate. I stand to be corrected here, but I think that next week could possibly be the most consequential week for global markets this year.’
Election Optimism Sparks Sterling (GBP) Rally
The Pound rallied near the end of the week after confidence the Conservatives will secure a majority in next week’s election grew.
While Sterling edged lower on Friday, the pairing continued to trade above the $1.31 mark.
This week, opinion polls have suggested that Boris Johnson’s party will be able to win an outright majority, allowing him to take the UK out of the EU next month.
Commenting on the recent polls, chief currency strategist at RBC Capital Markets, Adam Cole noted:
‘The broad trend in the polls is not really changing now and the Conservative lead on my poll of polls is about 11 percentage points, which is reasonably sufficient to get them a reasonably decent majority.
‘With only a week to run to the election, if the trend in the polls stays flat, then sterling probably keeps going up.’
The heightened chance of an end to more than three years of Brexit uncertainty has boosted Sterling to fresh highs against a handful of currencies this week.
US Dollar (USD) Rises as US-China Tensions Reignited
The Dollar received a slight boost after US President Donald Trump said trade talks with China were ‘moving right along’.
However, markets remained unconvinced talks were progressing as smoothly as suggested due to an absence of enthusiasm from Beijing.
Officials in Beijing reiterated that some US tariffs must be rolled back in order to secure a preliminary deal. Risk appetite rose as Washington didn’t indicate they would be willing to do this.
Added to this, China has reacted angrily to both Trump’s support of Hong Kong and legislation backing China’s Uighur Muslims.
The Uighur Act passed by the House of Representatives calls for a ban on exports that can be used for the surveillance of individuals.
An anonymous source from Beijing told Reuters that China could tolerate the earlier Hong Kong bill, but the Uighur Act could jeopardize a trade deal.
Pound US Dollar Outlook: Will Jobs Data Weigh on USD?
Looking ahead to this afternoon, the US Dollar (USD) could fall against the Pound (GBP) following the release of the US non-farm payrolls.
If the number of jobs added to the American economy is lower than expected, Dollar sentiment will slide.
Meanwhile, US wage growth could send the ‘Greenback’ lower.
If November’s average hourly wages do not rise as high as forecast, the Pound US Dollar (GBP/USD) exchange rate will edge higher.