Bets of High US Jobless Claims Lifts Pound Sterling US Dollar (GBP/USD) Exchange Rate
Anticipation ahead of the release of the latest US jobless claims figures helped to keep the Pound Sterling to US Dollar (GBP/USD) exchange rate on a positive footing.
With markets anticipating another sharp increase in jobless claims on the week, as well as a potential revision to the previous figure, support for the US Dollar (USD) proved limited.
As the US economy comes under increasing pressure from the Covid-19 outbreak this has diminished the potential for US Dollar gains.
An easing in market risk aversion also put a dampener on USD exchange rates as safe-haven demand temporarily diminished.
If the jobless claims figure rises as sharply as some analysts expect this could see the GBP/USD exchange rate gaining fresh ground as the prospect of a deeper US slowdown rises.
Soft UK Services PMI Set to Limit Pound Sterling Upside
The mood towards Pound Sterling (GBP) could sour once again on Friday, meanwhile, if March’s finalised UK services PMI sees any negative revision.
As the initial reading saw the index plunge from 53.2 to a record-low of 35.7 this raised fresh doubts over the outlook of the UK economy.
However, as the earlier estimate failed to account for the weeks following the Covid-19 shutdown the possibility of an even weaker PMI reading remains.
Evidence of the service sector shedding even further momentum at the end of the first quarter would significantly raise the risk of a major gross domestic product slump.
Unless the survey sees an upward revision, following in the steps of the corresponding manufacturing PMI, the GBP/USD exchange rate looks set to return to a downtrend.
US Dollar Braces for Weaker Non-Farm Payrolls Report
Even if the UK data disappoints, though, the GBP/USD exchange rate could still find support ahead of the weekend.
In the wake of the recent deterioration in US jobs data investors are wary of the potential for a sharp decline in the headline change in non-farm payrolls figure for March.
Fresh confirmation that the labour market loosened significantly in the last month, as a result of the Covid-19 crisis, could weigh heavily on the US Dollar.
As long as the world’s largest economy shows greater signs of coming under pressure as the impact of the pandemic continues to unfold this may limit the strength of USD exchange rates.
While a lingering sense of global market risk aversion could still offer the US Dollar support, thanks to its status as a safe-haven currency, this may not be enough to outweigh a poor payrolls report.
A major decline in the headline payrolls figure could offer the GBP/USD exchange rate a solid rallying point, helping the pairing to climb further away from its recent thirty-five year low.