Pound-to-Dollar Falls Further Following Big Stateside Jobs Beat


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Another above-consensus jobs report helps the Dollar recover.

The Pound to Dollar exchange rate (GBP/USD) is down a further quarter of a per cent on the day, reaching 1.3621, following news that the United States added 147K jobs during June.

This was ahead of the consensus expectation for a non-farm payroll figure of 110k, which would have marked a notable slowdown from May's upwardly revised 144K.

Corroborating a message of resilience was the unemployment rate, which unexpectedly fell to 4.1% from 4.2%, defying expectations for a rise to 4.3%.

If there was one spot of softness, it was in wages, where average hourly earnings managed a 0.2%/m gain, whereas a 0.3% figure was expected. However, wage growth - a key driver of inflation - doesn't face an imminent collapse with such a robust labour market underpinning it.

"These latest job figures show the U.S. economy remains as solid as a rock. It’s difficult to imagine what could cause the US economy to crack given tariff turmoil has done little to shake the foundations. As a result, hopes for a rate cut from the Fed in July have all but disappeared," says Isaac Stell, Investment Manager at Wealth Club.

The erasure of any hope for a cut as soon as July equates with rising U.S. bond yields and a stronger Dollar.


Above: GBP/USD at 15-minute intervals.


We could be entering a new phase in global FX, whereby the seemingly relentless USD selloff finally has a reason to reverse.

Those wanting a stronger Pound-Dollar exchange rate, should therefore be wary of a summer of decline, particularly given the UK's increasingly choppy fiscal and political waters.

A key tenet of the Dollar's selloff is the notion that the U.S. economy is finally slowing and it was losing its tag as an exceptional destination for foreign capital.

However, the data disagrees with this notion, and the continued growth, particularly in the labour market, means the Dollar could find a bit more love in the second half of the year.

Backing the message from the headline non-farm payroll figures was the weekly Initial Jobless Claims report, which read at 233K, down from 237K prior and below expectations for 240K.

Tuesday saw the Dollar strengthen after the odds of a July rate reduction at the Fed receded in the wake of a set of strong numbers:

ISM Manufacturing survey read at 49% in June, up from 48.5% in May and above consensus expectations for 48.8
ISM prices paid were decidedly inflationary at 69.7%, beating expectations for 69 and May's print of 69.4
JOLTS job openings rose to 7.769M in May, exceeding estimates for 7.3M and a rise on April's 7.395M

"These are not decisive signals, but they point toward higher prices and a resilient labour market – hardly a case for imminent Fed action... giving the dollar some brief support," says Francesco Pesole, FX Strategist at ING Bank.


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