Pound US Dollar (GBP/USD) Exchange Rate Volatile as US Jobs Data Beats Forecasts
(Updated 13:10, 05/01/24) The Pound US Dollar (GBP/USD) exchange rate dropped this afternoon following stronger-than-expected US jobs data. However, the pairing quickly bounced back without a clear catalyst.
December’s non-farm payrolls report showed that the US economy added 216,000 jobs last month, up from November’s 173,000 and above forecasts of 170,000. Meanwhile, the unemployment rate unexpectedly held steady at 3.7% and hourly earnings ticked up from 4% to 4.1%, rather than cooing to 3.9%.
The latest data points to resilience in the US labour market, prompting investors to scale back bets on a March interest rate cut from the Federal Reserve.
This has lent the US Dollar (USD) fresh support, after a risk-off mood lifted the safe-haven currency through the morning.
The GBP/USD exchange rate dropped to a daily low point of $1.2611 in the wake of the data release. However, the Pound (GBP) has since managed to claw back these losses, with the pairing currently at $1.2662.
As the afternoon unfolds, we could see the Pound US Dollar exchange rate turn south once again as the ‘Greenback’ gathers strength.
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Pound US Dollar (GBP/USD) Exchange Rate Slips amid Downbeat Mood
The Pound US Dollar (GBP/USD) exchange rate is struggling this morning as a gloomy market mood pressures the currency pairing.
At the time of writing, GBP/USD is trading at around $1.2658, down 0.2% on the day.
Pound (GBP) Softens amid Risk-Off Trade
The Pound (GBP) is on the defensive today as the increasingly risk-sensitive currency is impacted by a souring market mood.
Investors are anxious about escalating tensions in the Middle East, as the Israel-Hamas war has begun to draw other countries into the conflict.
Yesterday, a US airstrike on Baghdad, the capital of Iraq, killed the commander of a Shia militia backed by Iran, a move that the Iraqi government called a ‘dangerous escalation and aggression’.
The military intervention came shortly after an Israeli missile strike on Beirut, Lebanon’s capital, killed a senior Hamas figure. In addition, Islamic State suicide bombers killed over 80 Iranians at a memorial for Revolutionary Guards commander Qassem Suleimani.
Earlier in the week, US Navy forces fired on Yemeni Houthi militants in the Red Sea. Ten Houthi rebels were killed.
These escalations have stoked fears that the Israel-Hamas conflict is spiralling out of control.
With the global geopolitical picture deteriorating even further, anxious investors are opting for safer assets today.
US Dollar (USD) Capped by Fed Rate Cut Bets
This risk-off mood is boosting the safe-haven US Dollar’s (USD) appeal today, with the ‘Greenback’ gaining ground against the majority of its peers.
However, USD’s gains seem limited as investors continue to bet on a coming interest rate cut from the Federal Reserve.
The Fed’s meeting minutes on Wednesday evening fuelled expectations that the US central bank is close to unwinding its policy tightening.
Policymakers are confident that inflation is under control, and some rate-setters are concerned that monetary policy is currently too restrictive.
With markets continuing to price in a March rate cut, the US Dollar’s potential seems limited.
GBP/USD Exchange Rate Forecast: Non-Farm Payrolls to Drive the Dollar Lower?
Looking ahead, the latest US non-farm payrolls figure is the focus for investors this afternoon, with the release holding the potential to see GBP/USD recover.
Forecasters expect to see the number of jobs added to the US economy drop in December, slowing to 170,000 from 199,000 in November.
If the payrolls figure does indicate a cooling US labour market, fresh Fed rate cut bets could weigh heavily on the US Dollar.
Later on, December’s ISM services PMI is also due out. The survey score is anticipated to edge slightly lower. Any unexpected results could trigger volatility.