Pound US Dollar (GBP/USD) Exchange Rate Spikes amid Shock ADP Fall

Pound US Dollar (GBP/USD) Exchange Rate Spikes amid Shock ADP Fall

Article updated 13:48, 30/08/2023:

The Pound US Dollar (GBP/USD) exchange rate is spiking this afternoon, following the release of the latest ADP employment figures.

The figures printed significantly below market expectations, showing that around 177,000 jobs were created in August. This is a sharp cooldown from July’s upwardly revised amount of 371,000.

With this, the perception has continued to grow that the US labour market is beginning to loosen. As such, the ‘Greenback’ is cratering against most major peers.

At the time of writing, GBP/USD is trading at around US$1.2709, a rise of just under 0.6% from the morning’s opening rates.

Original article continues below:

Pound US Dollar (GBP/USD) Exchange Rate Narrows Ahead of Key US Labour Data

The Pound US Dollar (GBP/USD) exchange rate is trading within narrow boundaries this morning, as investors await the afternoon’s ADP employment data.

At the time of writing, GBP/USD is trading at around US$1.2651, showing little movement from the morning’s opening rates.

US Dollar (USD) Firms as Investors await ADP Data

The US Dollar (USD) is edging higher this morning, as tentative trade clouds markets ahead of the afternoon’s ADP employment data.

The US labour market has been in focus recently, as the Federal Reserve aims for a ‘soft landing’ while cutting inflation down. Yesterday, the JOLTs job openings data fell unexpectedly, weighing on the ‘Greenback’ and prompting concerns of slack in the labour market.

Julia Pollak, Chief Economist at ZipRecruiter, commented:

‘Both declines [in openings and quits] point to cooling labor market conditions, which will come as a relief to many employers, but bring back many of the old challenges that have characterized job search for decades.’

Because of this, investors are likely concerned that this release will follow suit. If the fears of a cooling jobs market are confirmed, the ‘Greenback’ may weaken this afternoon.

However, the tetchy market mood is yielding safe-haven flows for USD, lifting it above more risk-sensitive assets.

Pound (GBP) Wavers amid Light Data Calendar

The Pound (GBP) is seeing wavering trade this morning, as a lack of data drivers limits the currency’s appeal.

Furthermore, as an increasingly risk-sensitive currency, Sterling is likely being capped by today’s cautious market mood.

However, prospects of a growing divergence between the Bank of England (BoE) and other central banks is cushioning GBP. The BoE are widely expected by markets to continue hiking interest rates as inflation remains significantly higher in the UK than other territories.

Ultimately, the Pound is largely trading in line with wider market dynamics this morning, due to the short supply of releases.

Pound US Dollar Exchange Rate Forecast: BoE Pill Speech to Buoy GBP?

Looking ahead for the Pound, BoE Chief Economist Huw Pill is scheduled to deliver a speech tomorrow.

With the UK economic outlook taking a continual bashing, any hawkish remarks from Pill may do little to inspire investors. However, if the focus remains on tightening vs the UK’s economic stability, it could strengthen.

For the US Dollar, a bevy of impactful data is due to release in the short term. The core PCE price index release kicks this off, which economists anticipate to have increased in July to 4.2%.

If this prints accurately, the ‘Greenback’ may strengthen as it would likely bring renewed hike bets.

This is followed by the latest initial jobless claims, which are forecast to have increased over the week. If this prints accurately, USD could weaken amid signs of further looseness in the labour market.

This leads to the publication of the latest non farm payrolls data on Friday. In August, jobs created are forecast to have fallen. Could this weaken the ‘Greenback’?

John Mulcahey

Contact John Mulcahey

Do Not Sell My Personal Information