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How Might Today’s US Payrolls Data Impact the GBP/USD Exchange Rate?

Pound US Dollar

GBP/USD Exchange Rate Muted Ahead of Top Tier US Data

The Pound US Dollar (GBP/USD) exchange rate is currently rangebound this morning, with Sterling consolidating its recent gains as markets brace for some high impact US data later this afternoon.

At the time of writing the GBP/USD exchange rate is trading at around $1.2202 this morning, virtually unchanged from its opening rate and leaving the pairing at a five-week high.

Can an Upbeat Payroll Report Help to Reserve the US Dollar’s (USD) Losses?

The US Dollar has faced some considerable headwinds this week, as USD investors were spooked by rising recession fears following a shock contraction in the ISM manufacturing PMI in August. But could today’s Payroll figures offer some respite for the ‘Greenback’?

Economists forecast suggest we should see a modest downtrend in payroll numbers last month, with markets expecting a slide from 164,000 to 158,000.

However, with yesterday’s ADP employment report coming in above forecast, there is some optimism that payrolls could also outperform expectations, potentially helping to lift some of the selling bias currently surrounding the US Dollar.

Also on the docket today will be a speech by Federal Reserve Chair Jerome Powell in Zurich later this evening.

USD investors will be looking for any tip offs as the bank’s future policy plans as seek confirmation that the bank will cut rates again this month as is widely expected.

Pound (GBP) Riding High on Brexit Optimism, But Can it Last?

The Pound (GBP) has enjoyed considerable support this week, rising over three cents from a three-year low struck against the US Dollar (USD) earlier in the week on the back of growing hopes that the UK will avoid a no-deal Brexit.

This comes after Boris Johnson suffered a number of defeats in parliament, after MPs backed a bill to delay Brexit and rejected the PM’s call for a general election.

However analysts warn that more of question of when a snap election will be called rather than if, and as a result the recent uptrend in the Pound is unlikely to last.

Analysts at ING suggest:

‘A UK election now looks inevitable – the only question now is ‘when’. However, the chances of a ‘no deal’ Brexit on 31 October appear to have receded, but there are still ways it could happen, and given the outcome of an election looks deeply uncertain, despite the Conservatives’ lead in the polls, the rebound in Sterling is unlikely to have legs.’

In the meantime there is room for Sterling to extend its gains further if next week’s Employment data prints strongly as expected.