Pound US dollar (GBP/USD) exchange rate weakens following forecast-smashing US jobs data
Article updated 15:30, 5/4/2024:
The pound US dollar (GBP/USD) exchange rate is weakening this afternoon in the wake of the latest US non farm payrolls report.
In March, the US private sector added an astonishing 303,000 jobs compared to February. This eclipsed expectations of a 200,000 print, and indicated healthy levels of employment in the US labour market.
Lauren Goodwin, Chief Market Strategist at New York Life investments, commented:
‘This is another really strong report. This report and the February report showed some broadening in terms of job creation, which is a very good sign.’
Furthermore, this is prompting investors to adjust their bets on the timing of the Federal Reserve’s first interest rate cut. Due to robust employment and resilient economic activity, the Fed may be able to keep rates unchanged for longer, which is strengthening USD.
At the time of writing, GBP/USD is trading at around US$1.2612, a fall of roughly 0.2% from today’s opening levels.
Pound US dollar (GBP/USD) exchange rate flat ahead of key US labour data
The pound US dollar (GBP/USD) exchange rate is muted this morning, as markets await the latest US non farm payrolls report.
At the time of writing, GBP/USD is trading at around US$1.2626, showing little movement from the morning’s opening rates.
US dollar (USD) tepid ahead of key jobs data
The US dollar (USD) is wavering this morning, as investors await the latest non farm payrolls report. Due this afternoon, the reading is expected to show that job creation slowed in March.
The American labour market has been in focus this week, amid a series of releases reflecting the level of employment.
While it remains in robust territory, the majority of data points suggest growing slack in the labour market. This is, in turn, serving to undermine USD against its peers.
Francesco Pesole, FX Strategist at ING, commented:
‘Yesterday, the NFIB reported only 11% of small businesses are looking to create jobs in the next three months, the lowest percentage since May 2020. Small businesses account for roughly half of total US jobs and the hiring indicator has proven to have better predictive power official payrolls.’
Should the jobs market continue to cool, it may prompt the Federal Reserve to cut interest rates more aggressively. Because of this, rate cut bet adjustments are likely bringing further pressure to the ‘Greenback’, limiting its movements.
Pound (GBP) wavers amid lack of data
The pound (GBP) is treading water this morning, as a lack of impactful data points pushes investor attention elsewhere.
GBP is likely being underpinned by analysis of news that UK house prices fell by roughly 1%. Due to uncertainty around the timing of the Bank of England’s (BoE) first interest rate cut, markets have grown less optimistic.
Kim Kinnaird, Director of Mortgages at Halifax, commented:
‘Financial markets have also become less optimistic about the degree and timing of Base Rate cuts, as core inflation proves stickier than generally expected. This has stalled the decline in mortgage rates that had helped to drive market activity around the turn of the year.’
Additionally, the market mood is off to a tentative start, sapping sentiment towards the increasingly risk-sensitive currency. Traders are nervous as peace efforts in the Middle East have gone largely awry, which is dampening risk appetite.
Pound US dollar exchange rate forecast: Minimal data to keep pairing muted?
Looking ahead to the start of next week, data releases for the pound remain hard to come by. Because of this, Sterling is unlikely to begin the week with any major movement.
However, due to its increasingly risk-sensitive nature, a shift towards bullish trading conditions could support GBP against safer peers.
For the US dollar, meanwhile, the data calendar is set to begin the week on a similarly quiet note.
Furthermore, with the latest US inflation data due to print on Wednesday, the ‘Greenback’ may trade quietly as investors anticipate the release.
Owing to its safe-haven nature, a shift towards downbeat trade could lift USD above riskier assets such as the pound.