Pound US Dollar (GBP/USD) Exchange Rate Jumps as US Jobs Data Falls Short
(Updated 13:55, 07/07/23) The Pound US Dollar (GBP/USD) exchange rate spiked to hit a 17-day high today after the latest US non-farm payrolls report came in below expectations.
The US economy added 209,000 jobs last month, below forecasts of 225,000. Additionally, May’s job creation was revised down from 339,000 to 306,000.
The data was particularly disappointing after yesterday’s ADP employment change (another measure of US jobs growth) printed at a whopping 497,000 – more than double the expected figure.
Investors reacted quickly to the data release, which saw the US Dollar (USD) slump. Signs of a slackening labour market take some pressure off the Federal Reserve to continue raising interest rates.
However, we may see more volatility as the day unfolds. While the payrolls figure disappointed, the broader picture is more mixed.
The US jobless rate fell and wage growth was hotter than expected. Both these data releases may temper USD’s losses, as they favour more rate hikes from the Fed.
Original article continues below:
Pound US Dollar (GBP/USD) Exchange Rate Wavers as Investors Brace for Payrolls Report
The Pound US Dollar (GBP/USD) exchange rate is wobbling this morning, having briefly touched a two-week high yesterday, as investors brace for the latest US non-farm payrolls report.
At the time of writing, GBP/USD is trading at around $1.2735, virtually unchanged on the day.
Pound (GBP) Muted as UK Concerns Offset BoE Bets
The Pound (GBP) is trading without a clear direction today as mixed factors play on the UK currency.
Lending Sterling support is the prospect of more aggressive action from the Bank of England (BoE). Although analysts are fearful that the BoE may hike the UK into a recession, the Pound recently shrugged off these fears and managed to strengthen off the back of rate hike bets.
However, concerns do remain, as higher borrowing costs would worsen the cost-of-living crisis and damage the UK economy.
Meanwhile, new data from the Office for National Statistics (ONS) shows that, in the first quarter of this year, the UK suffered its largest decline in productivity in a decade.
UK @ONS confirms output-per-hour productivity dropped 0.6% in Q1 – the biggest such decline in 10 years.
In terms of levels, output-per-hour is 0.6% higher than in 2019. https://t.co/KAslfDjibz pic.twitter.com/FBAEgMpDo6
— Andy Bruce (@BruceReuters) July 7, 2023
The mixed tone around Sterling is seeing the currency fluctuate in a narrow range today.
US Dollar (USD) Flat Ahead of Vital Jobs Data
The US Dollar (USD) is also facing mixed movement as USD investors await the all-important non-farm payrolls report.
Yesterday saw notable volatility in the ‘Greenback’ after the ADP employment change data smashed forecasts and the ISM services PMI also exceeded expectations.
Today, USD has stabilised. Traders seem to be staying their hands until closer to the non-farm payrolls release. While the ADP figures came in hot, today’s payrolls report is considered more impactful.
A strong reading could cement expectations that the Federal Reserve will return to its tightening cycle with renewed hawkishness. A disappointing reading could dent the US Dollar.
Ahead of this potentially market-moving release, USD is fairly subdued. A risk-off mood is, however, keeping the safe-haven currency afloat.
GBP/USD Exchange Rate Forecast: Hot Payrolls Report to See the Dollar Soar?
Looking ahead, the latest US non-farm payrolls report will likely be the main driver of movement during today’s session.
Due out in the afternoon, the data is forecast to show a cooldown in jobs growth in June, following May’s hotter-than-forecast release. However, the figure is still set to be strong, and after yesterday’s ADP results, there is a chance it could print higher than expected.
Meanwhile, the US unemployment rate is set to tick lower, from 3.7% to 3.6%.
If the latest data shows that the American labour market remains tight, we could see the US Dollar surge on fresh Fed rate hike bets.
As for the Pound, a lack of UK data could leave Sterling to trade on domestic headlines and risk appetite. A souring market mood or downbeat news about the British economy could drive GBP lower.