Home » GBP » Pound Sterling to US Dollar Exchange Rate Falls from Best Levels with US Non-Farm Payrolls in Focus

Pound Sterling to US Dollar Exchange Rate Falls from Best Levels with US Non-Farm Payrolls in Focus

Federal Reserve

Pound to US Dollar Exchange Rate Sliding Back as Brexit Uncertainties Persist

While the Pound Sterling to US Dollar (GBP/USD) exchange rate saw a surge in demand earlier in the week on the back of Brexit speculation, that speculation alone wasn’t enough to bolster the Pound’s (GBP) outlook, and lasting uncertainty is now weighing on the pair again.

Still, since opening this week at the level of 1.2913, GBP/USD has seen largely solid gains, having thus far sustained most of the cent it climbed on Tuesday.

While GBP/USD has been unable to hold the half-month high of 1.3097 seen in the middle of the week, the pair continued to trend at the level of 1.3021 at the time of writing on Friday morning.

The Pound was unable to hold its best levels as Brexit uncertainty returned towards the end of the week, while the US Dollar (USD) benefitted from a more hawkish than expected Federal Reserve and some strong US ecostats.

Pound (GBP) Exchange Rates Slip Back on Brexit Uncertainty despite Bank of England (BoE) Optimism

Even after the formal Brexit date was delayed until the 31st of October, Pound movement continues to be dominated by Brexit news. Even a slightly more positive than expected Bank of England (BoE) wasn’t able to help the Pound to hold its best levels.

Earlier in the week, the Pound saw a surge in demand on reports that UK officials were becoming more optimistic that a compromise Brexit deal could be met.

However, amid doubts that a deal can be reached very quickly, as well as expectations of months more uncertainty, the Pound’s best levels were temporary. According to Philip Shaw at Investec:

‘The main factor underpinning our forecast for a strengthening in sterling is the agreement and ratification of a Brexit deal,

But the extension of Article 50 out to October 31 means that the relief rally in the currency is set to come later than our previous forecast.’

Philip Shaw at Investec

Due to Brexit uncertainty, the Pound was unable to benefit from signals that the Bank of England was likely to hike UK interest rates more in the coming years than markets currently expect.

US Dollar (USD) Exchange Rate Rebound Lacks Drive Ahead of US Non-Farm Payrolls

The US Dollar started out the week fairly bearishly, tumbling on signs of weakness in US data and market bets that the Federal Reserve could cut US interest rates at some point over the next year.

As a result, the US currency has been rebounding slightly since the Federal Reserve held its May policy decision on Wednesday evening.

Despite concerns from investors that the Fed could become more dovish amid recent weak US data, the bank instead indicated that it still had no intentions to hike or cut US interest rates any time soon.

The news led to US interest rate cut bets lightening somewhat, which helped the US Dollar to rebound from its worst levels.

Yesterday’s US data gave further support to the US Dollar rebound, as both Q1 Non-Farm productivity figures and March factory orders beat market expectations.

Pound to US Dollar (GBP/USD) Exchange Rate Outlook Could Worsen if US Job Stats Impress

Before markets close for the week, Pound to US Dollar (GBP/USD) exchange rate investors are focusing their attention on this afternoon’s upcoming US Non-Farm Payroll report.

The typically influential job market report often affects the Federal Reserve’s outlook and market Federal Reserve bets, so the US Dollar could see a direct impact if these stats surprise investors.

Recent US jobs data has been strong, so analysts are expecting a solid Non-Farm Payroll report too. If the Non-Farm Payroll data beats expectations, the US Dollar could see another boost in demand and GBP/USD could see further losses before markets close for the week.

Other US data to keep an eye out for today includes March’s wholesale inventories, and April’s non-manufacturing PMI data from ISM.

Of course, if these stats disappoint investors instead then the Pound to US Dollar (GBP/USD) exchange rate outlook will rise a little and the pair will be more likely to sustain notable gains this week.