Pound US Dollar Exchange Rate Trades at Two-Week High Ahead of US Payroll Release

Pound US Dollar Exchange Rate Flat as Investors Await US NFP Report

The Pound US Dollar (GBP USD) exchange rate is holding steady this morning as investors await the publication of the latest US non-farm payroll report later this afternoon.  

At the time of writing the GBP/USD exchange rate is trading at around $1.3883, just shy of the two-week high struck earlier this morning. 

US Dollar (USD) Rangebound Ahead of Payroll Release 

The US Dollar (USD) is trading in a narrow range against the Pound (GBP) and the majority of its other peers this morning, with USD investors reluctant to make any aggressive bets ahead of the release of the latest US payroll report. 

Analysts are forecasting a robust increase of around 750,000 new paid positions last month, but there is a high level of uncertainty going into today’s report, with the US Dollar having been knocked earlier in the week after the latest ADP employment figures printed well below expectations

Jim Reid, Head of Global Fundamental Credit Strategy at Deutsche Bank predicts: 

‘In terms of what to expect today, our US economists see nonfarm payrolls growing by +700k in August, which follows an 11-month high of +943k in July. One caveat they do note however, is that historically the August report has disappointed consensus expectations, so it’ll be interesting to see if that happens again.’ 

Expect to see the US Dollar come under significant selling pressure later this afternoon if August’s payrolls do in fact come up short. 

Pound (GBP) Muted as UK Services PMI Revised Lower 

At the same time, the Pound is struggling to attract support this morning, following the publication of the UK’s latest services PMI

According to data published by IHS Markit, August’s finalised services index was revised down from 55.5 to 55, falling from a reading of 59.6 in July. 

This was the slowest expansion of the UK’s vital service sector in six-months and raises additional concerns over the resilience of the economic recovery in the face of supply chain and labour issues, much to the dismay of GBP investors. 

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, commented: 

‘The third consecutive monthly fall in growth in the services sector showed that a lack of staff and raw materials in August continued to rein back on recovery, after the spring surge. 

‘Supply shortages and logistics difficulties will pile on the pressure in the coming months.’ 

Pound US Dollar Forecast: Slowing US Service Sector Activity to Dent  

In addition to the US payroll report, the Pound US Dollar exchange rate is also set to be influenced by the latest ISM non-manufacturing PMI release later this afternoon. 

Economists forecast today’s figures will report economic activity in the US service sector slowed in August, potentially applying additional pressure to USD exchange rates today. 

Meanwhile, GBP investors will look to domestic coronavirus developments for additional direction today, with elevated case numbers likely to cap the upside potential of the Pound.