Pound US Dollar (GBP/USD) Exchange Rate Sinks as US Non Farm Payrolls Hotter-Than-Expected

Pound US Dollar (GBP/USD) Exchange Rate Sinks as US Non Farm Payrolls Exceed Forecasts

(Updated: 13:45, 2/12/2022) The Pound US Dollar (GBP/USD) exchange rate is sinking this afternoon, after the latest non farm payrolls data exceeded forecasts.

The data showed that the US had created 263,000 jobs in November. While still below October’s print, the print came far beyond the expected 200,000 and has led to renewed interest rate hike bets among investors.

At the current time of writing, GBP/USD is trading at around US$1.2149, a drop of nearly 0.9% from this morning’s rates.

Original article continues below:

Pound US Dollar (GBP/USD) Exchange Rate Rangebound as UK Retail Suffers

The Pound US Dollar (GBP/USD) exchange rate is narrowing this morning, as the cost-of-living crisis continues to impact UK retail.

At the time of writing, GBP/USD is trading around US$1.2261, showing little movement over the morning’s opening rates. However, this is still close to a high not seen since June 2022.

Pound (GBP) Steadies as Retail Suffers Through Worsening Cost-of-Living Crisis

The Pound (GBP) is seeing mixed trade this morning, as a lack of data leads investors to examine domestic news.

Following yesterday’s staggering rally to US$1.23, investors are cooling on Sterling as the latest retail analysis comes in. Footfall was reported to have fallen by 1.5% since October, and had fallen by 12.3% since 2019.

This fall was prompted by railway strikes and the cost-of-living crisis continuing to tighten consumer’s wallets.

Helen Dickinson, the British Retail Consortium Chief Executive, explored this further. She stated:

‘Rising inflation and low consumer confidence continue to dampen spending expectations in the run up to Christmas. Despite retailers doing their best to keep prices as low as possible for their customers, financial concerns are trumping spending for many households.’

With the retail outlook looking sombre as the UK’s recession continued, investors began pausing their support for Sterling.

However, optimism around the Northern Ireland Protocol may be underpinning GBP this morning. Simon Coveney, the Irish Minister for Foreign Affairs and Defence, believes a ‘landing zone’ on the protocol is possible soon.

US Dollar (USD) Cools as Investors Await Non Farm Payroll Data

The US Dollar (USD) is directionless this morning, as investors await the release of the latest non farm payroll figures.

As such, the anticipation is causing the market mood to shift to risk-on trade, leaving safe-haven currencies behind.

This compounded the losses sustained by the ‘Greenback’ yesterday, after the Federal Reserve took a surprising dovish pivot. Cooling inflation prompted Fed Chair Jerome Powell to signal that the central bank’s tightening policy may begin to slow.

Cushioning the ‘Greenback’ may be positive retail signals. The consumption-based US economy saw a 0.5% uptick in consumer spending during October, with Black Friday sales also being upbeat.

James Knightley, Chief International Economist at ING, stated:

‘The news on the Black Friday/Cyber Monday retail sales has also been good and means that real consumer spending is on track to rise at a 4% annualised rate in the current quarter.’

Pound US Dollar (GBP/USD) Exchange Rate Forecast: US Labour Market Slowdown to Dent USD?

Looking ahead for USD, the non farm payroll data will be the key focus for investors this afternoon. Analysts are anticipating a significant slowdown in the US labour market, which could bring further weakness to the ‘Greenback’.

For the UK, economic data remains scarce. As such, Sterling is likely to continue trading on domestic news and risk sentiment. Any further news on how the recession and cost-of-living crisis are affecting the UK may slow GBP.

However, if the markets continue to hold a healthy risk appetite, the increasingly risk-sensitive Sterling may climb further.

John Mulcahey

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