Pound to US Dollar Exchange Rate Jittery as Non-Farm Payrolls Beat Forecasts
Update 16:43 BST 02/07/2020:
The Pound Sterling to US Dollar (GBP/USD) exchange rate continued to hold most of this week’s gains on Thursday afternoon.
While GBP/USD slipped slightly from its best levels, it still trended in the interbank region of 1.24 at the time of writing.
The US Dollar (USD) saw mixed reaction to this afternoon’s stronger than expected US Non-Farm Payroll report.
It boosted hopes that the US economy was resilient. However, the US Dollar’s gains were limited as investors became more willing to take risks again.
Core unemployment jumped in June to 5.9% from 5.0% in May. It's rising at an accelerating rate.
Core unemployment removes temporary layoffs and adds the marginally attached. pic.twitter.com/9JJy00qkgr
— Jed Kolko (@JedKolko) July 2, 2020
(Originally published 10:36 BST 02/07/2020)
Pound to US Dollar Exchange Rate Higher Ahead of US Jobs Report
The Pound Sterling to US Dollar (GBP/USD) exchange rate is gaining this week. This is despite a lack of particularly fresh strength in the generally gloomy Pound (GBP) outlook. The US Dollar (USD) remains fairly unappealing on the US outlook ahead of key US data today.
After opening this week at the interbank level of 1.23, GBP/USD briefly slipped lower. GBP/USD touched on a low of 1.22 on Tuesday, the worst level in over a month.
However, since then GBP/USD has rebounded as Q3 2020 begins. At the time of writing on Thursday GBP/USD continues to climb. The interbank level trends in the region of 1.24.
Markets are awaiting key US Non-Farm Payroll data due later today. Of course, coronavirus developments continue to dominate global headlines too.
Pound (GBP) Exchange Rates Could Surge if Brexit Deal is Met
The Pound (GBP) saw a rise in demand this week, as investors bought the British currency back from its cheapest levels. It came as Q2 2020 drew to an end, some analysts speculating that the market saw Sterling as undervalued.
However, the Pound’s potential for gains is still limited. Markets are still concerned over Britain’s coronavirus outlook. Fears that UK-EU Brexit negotiations may not end in a deal are also causing concern.
Still, analysts expect that if a trade deal was formed, the Pound could see a surge in demand.
Recent developments have dampened analyst optimism slightly, but many still believe that the ultimate outcome will be an optimistic one. According to Simona Gimbarini at Capital Economics:
‘Our central scenario is that some kind of Brexit deal or delay will be agreed. With this in mind, we think Sterling will rise, however, given recent developments, the risks to our forecasts are to the downside,’
US Dollar (USD) Exchange Rates Jittery as Markets Await Non-Farm Payrolls
The US Dollar (USD) is a safe haven currency, and safe haven demand has been a little stronger lately as coronavirus cases and fears surge again.
However, safe haven demand has been mixed. Some currencies more correlated with growth and risk have been benefitting from continued signs of economic rebound.
This, as well as fears over how the US economy will be hit by its own worsening coronavirus situation, are keeping the US Dollar down.
For now, US Dollar investors are awaiting this evening’s US Non-Farm Payroll data before making any big moves on the US currency.
Pound to US Dollar (GBP/USD) Exchange Rate Focused on Non-Farm Payroll Report
The US will be observing the Independence Day holiday tomorrow. As a result, the latest Non-Farm Payroll report, typically a Friday publication, will be coming in later today instead.
Investors are hesitant to move too much on the US Dollar (USD) ahead of the key June report. However, analysts are uncertain that it will influence the US outlook notably.
Will be hard to conclude anything definitive from tomorrow's #jobs report::
Many competing influences make it difficult to distill insights on durable labor market trends;
Data already out-dated given economic re-opening reversals and layoff intentions trending up to larger firms
— Mohamed A. El-Erian (@elerianm) July 1, 2020
Even if the data impresses, the worsening US coronavirus situation could put a lid on any fresh optimism.
Still, the Pound’s (GBP) potential for gains is limited as well. Markets will be focused on Britain’s own pandemic situation, as well as Brexit developments.
Tomorrow’s UK services and composite PMIs could also influence the Pound to US Dollar (GBP/USD) exchange rate.