Pound US dollar (GBP/USD) wobbles despite rising Fed rate cut bets
Article updated 16:40, 06/09/2024
The pound US dollar (GBP/USD) exchange rate is holding steady this afternoon despite a disappointing set of US employment data.
Following a deluge of downbeat jobs data this week, the hotly-anticipated non farm payrolls report came in notably lower than forecast in August. The data revealed that the US economy added 142,000 jobs last month, falling short of the 160,000 expected, though rising notably from the previous month’s downwardly revised 89,000.
As rising concerns about the health of the US labour market feed into expectations of an aggressive policy-easing cycle from the Federal Reserve, USD remains on the back foot, wavering close to multi-month lows as the week nears an end.
Richard Carter, Head of Fixed Interest Research at Quilter Cheviot, noted:
‘Alongside this disappointing August figure, July’s nonfarm payrolls number was also revised down from 114,000 to just 89,000. Meanwhile, the unemployment rate fell slightly to 4.2% following a rise to 4.3% in July, and wage growth came in at 3.8% on an annual basis, up 0.2% compared to 3.6% reported last month.
Markets have been pricing in significant cuts before year end, with many economists touting more than 1%, and today’s labour market print could exacerbate this further. As was the case last month, this data release has proven notably weaker than had been hoped, suggesting the economy may be weakening more than is consistent with the Fed’s aim of a soft landing.’
However, as cautious trade permeates global markets, the safe-haven US dollar’s losses appear largely cushioned at this time.
Looking to the pound, an ongoing lack of data and deteriorating market mood weigh on the increasingly risk-sensitive currency, leaving GBP on the backfoot this afternoon.
Looking ahead, could a data-light calendar in both the US and the UK on Monday see firming Fed rate cut bets sink the ‘greenback’?
At the time of writing, GBP/USD is trading at around $1.3147, virtually unchanged from today’s opening levels.
Original article continues below:
Pound US dollar (GBP/USD) exchange rate wobbles prior to US jobs data
The pound US dollar exchange rate is rangebound this morning as markets await the latest high-impact US employment releases.
At the time of writing the GBP/USD exchange rate is trading at around $1.3181, virtually unchanged from this morning’s opening rate.
US dollar (USD) stumbles ahead employment data
The US dollar (USD) is facing headwinds this morning as investors brace for the latest market-moving US jobs data.
The latest US non farm payrolls report is due for release this afternoon with a projected weak figures seemingly deterring investor interest in the ‘greenback’ in the meantime.
Following a deluge of downbeat US jobs data in recent months, which includes a hefty downward revision to last month’s non farm payrolls report, further signs of a deteriorating US labour market could weigh heavily on USD exchange rates later today.
While analysts forecast the high-impact data to reveal slight uptick in the number of jobs added by the US economy, the release is expected to remain near multi-month lows.
Commenting on the American labour market earlier in the week, Federal Reserve Chair Jerome Powell said:
‘It seems unlikely that the labour market will be a source of elevated inflationary pressures anytime soon. We do not seek or welcome further cooling in labour market conditions.’
With this in view, could signs of continually weak US employment reinforce expectation that the Fed will aggressively lower interest rates this month, thereby pressuring the ‘greenback’?
Pound (GBP) fluctuates amid lack of data
The increasingly risk-sensitive pound (GBP) is largely subdued this morning amid a lack of fresh UK data and an uncertain market mood.
With market-moving UK data in short supply, market risk dynamics may be the core catalyst of GBP movement today.
Meanwhile, growing speculation that the Bank of England (BoE) could deliver a less aggressive policy-easing cycle than that of other major central banks may buoy the pound today. As investors and analysts alike continue to reduce their near-term BoE rate cut bets, Sterling could hold steady as the week nears its end.
Rob Wood, Chief UK Economist at Pantheon Macroeconomics, is amongst those betting on a delayed monetary easing cycle from the bank, stating that there is ‘no reason to rush to lower rates again in September.’
Pound US dollar exchange rate forecast: US employment data to drive volatility
Looking ahead, the focus for USD investors this afternoon will be the latest employment data. Further signs of slumping US employment could drag the ‘greenback’ this afternoon, further reinforcing expectation that the Federal Reserve could lower interest rates next month.
However, expectation that US unemployment will inch lower in July could cushion USD’s downside.
Looking to the UK, an ongoing lull in British economic data could see the pound left vulnerable to global risk dynamics. With market moving US jobs data set for release, potentially volatile trading conditions could drive movement in the increasingly risk-sensitive pound, with any upbeat trade likely to boost GBP exchange rates. Alternatively, an anxious sentiment may see Sterling’s safe-haven rivals take precedent.