Pound US Dollar (GBP/USD) Exchange Rate Rebounds amid USD Volatility
(Updated 16:15, 06/10/23) The Pound US Dollar (GBP/USD) exchange rate rebounded from this afternoon’s slump, ending the European session virtually unchanged from its opening levels, after US jobs data sparked significant volatility.
The latest US non-farm payrolls report smashed forecasts. According to the report, the US economy added 336,000 jobs last month, almost twice the expected 170,000. August’s figure was also revised up, from 187,000 to 227,000.
This scorching hot reading was particularly surprising after the ADP employment report earlier in the week showed job creation declining significantly last month.
With the US labour market seemingly holding strong, this could put more pressure on the Federal Reserve to deliver another interest rate hike next month and to hold rates higher for longer. This initially sent the US Dollar (USD) soaring.
However, the Pound (GBP) somehow managed to bounce back against the Dollar, without a clear catalyst for the movement.
It seems as though some short-term traders may have sought to cash in on the US Dollar’s sudden jump in value, with this profit-taking immediately trimming USD’s gains.
Looking forward to next week, we could see the US Dollar climb higher as markets begin to price in the possibility of another Fed rate hike.
At the time of writing, the GBP/USD exchange rate is trading at $1.2203, having bounced off an earlier low of $1.2105.
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Pound US Dollar (GBP/USD) Exchange Rate Finds Modest Success amid Cautious Optimism
After a subdued start to the session, the Pound US Dollar (GBP/USD) exchange rate is attempting to strengthen as a cautiously upbeat market mood supports the pairing.
At the time of writing, GBP/USD is trading at $1.2198. This is around 0.2% higher than at the start of the European session.
Pound (GBP) Buoyed by Improving Mood
The Pound (GBP) is trying to push higher today as an improvement in risk appetite buoys the increasingly risk-sensitive UK currency.
However, Sterling’s upside seems severely limited so far as many of the headwinds hitting the Pound in recent weeks continue to impact GBP.
Investors are fearful of the possibility of a coming UK recession, with recent data and economic forecasts pointing to a prolonged period of poor growth.
Amid these economic concerns, markets are betting on the Bank of England (BoE) to not raise interest rates any higher, which is adding to the pressure on GBP.
These factors are currently limiting Sterling’s success.
US Dollar (USD) Muted Ahead of Key Data
Meanwhile, the US Dollar (USD) seems slightly softer this morning as the better mood in markets dampens the safe-haven currency’s appeal.
USD investors are also reluctant to bet heavily on the currency ahead of potentially high-impact jobs data later today.
September’s non-farm payrolls report could have a significant impact on the Federal Reserve’s next policy decision. As a result, some currency traders are hesitant to buy or sell USD in the run-up to the release.
GBP/USD Exchange Rate Forecast: Non-Farm Payrolls to Drag Dollar Lower?
Looking ahead, the US non-farm payrolls report is in the spotlight this afternoon.
Job creation is forecast to have slowed in September, which could put some pressure on the US Dollar. If it presents further evidence that the American labour market is cooling, then this could dent bets on another interest rate hike from the Federal Reserve.
Any above- or below- forecast readings could spark even more significant movement in USD. Earlier this week, the ADP employment report – another measure of job creation – printed well below expectations, triggering a USD selloff.
Today’s data is seen as more impactful than the ADP report, so a similar drop in payrolls could see the ‘Greenback’ slump.
Conversely, a stronger-than-expected reading could see USD soar.
Meanwhile, UK economic data remains thin on the ground throughout today’s session. As a result, risk appetite and domestic economic news may be the key drivers of movement.
If there are any fresh headlines that spark anxiety about the UK’s economic outlook, Sterling could come under renewed selling pressure.