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GBP/USD Exchange Rate to Strengthen Further on US Jobs Data?

Pound Sterling Currency Forecast

GBP/USD Exchange Rate Holds Strong as Markets Await US Non-Farm Payrolls

The Pound US Dollar (GBP/USD) exchange rate has made modest gains today, holding near a five-month high, as USD investors become cautious ahead of impactful American jobs data.

At the time of writing the GBP/USD exchange rate is trading at around $1.2276, marginally higher than this morning’s opening rate.

Cautious Mood to Keep US Dollar (USD) on the Back Foot?

The US Dollar (USD) is struggling to find its footing this morning as the combination of a lukewarm market mood and caution among USD investors impedes movement.

USD investors are awaiting the unemployment rate and non-farm payrolls figures for November. If non-farm payrolls print as expected, the forecast decline from 261,000 to 200,000 could dent USD on the expectation of smaller Federal Reserve interest rate hikes.

If the payrolls figure misses forecasts, like the ADP data did earlier this week, USD could slump.

However, it’s possible if the unemployment rate remains unchanged at 3.7% this could somewhat limit losses for the US Dollar.

Looking to next week the ISM non-manufacturing PMI is due. Forecasts predict a drop in service sector activity from 54.4 to 53.9. If this prints as true the decline could indicate a worsening US economy, which would reinforce the Fed’s desire to reduce interest rates and therefore likely dent USD.

Pound (GBP) Upside Limited by Domestic Headlines?

The risk-sensitive Pound (GBP) has found some success against the safer US Dollar today, as a moderately risk-on tone supports GBP. However, a lack of UK data has meant GBP investors are focusing on worrying domestic headlines.

The UK’s bleak economic outlook appears to be keeping a lid on the Pound. The cost-of-living crisis continues to impact consumers and businesses alike. The British Retail Consortium (BRC) has found that high-street shopping continues to decline as the public becomes more price conscious.

Later today, if the US data reveals a slowing labour market then it could trigger a risk-on rally. If this happens, the riskier Pound could climb to fresh multi-month highs against the Dollar, while perhaps gaining ground on some of its other peers.

Looking ahead to next week the UK’s services PMI is due on Monday. Forecasts predict the level of service activity to stay steady at 48.8. If true, this could lead support hopes that the UK recession won’t be as deep as first feared. The data could surprise investors by coming in better than expected like yesterday’s manufacturing data, which would likely boost Sterling.

On Tuesday, November’s retail sales figures could curb the Pound. Whilst the data is expected to print a 0.6% year-on-year rise, this represents a significant slowdown in recent months. Slowing gains could stoke recession fears amongst investors.

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