Plunge in US Payrolls Fails to Prevent Pound US Dollar (GBP/USD) Exchange Rate Losses
A bigger-than-expected decline in the headline US non-farm payrolls figure was not enough to keep the Pound Sterling to US Dollar (GBP/USD) exchange rate from slumping sharply.
While the decline of -701,000 drove March’s unemployment rate up from 3.5% to 4.4% this failed to knock the US Dollar (USD) off its positive footing at this stage.
Although the US labour market showed significant signs of loosening USD exchange rates held their footing, in spite of mounting worries over the outlook of the world’s largest economy.
The latest signs of weakness from the Chinese service sector helped to encourage a fresh bout of safe-haven demand ahead of the weekend, helping to limit the impact of the jobs report.
Even so, the underlying picture of the US labour market remains far from encouraging, with the impact of the Covid-19 crisis still continuing to filter through into the data.
But today's reality — three weeks later — dwarfs any of this.— Justin Wolfers (@JustinWolfers) April 3, 2020
My calculations (see today's @UpshotNYT) show that we've probably lost an addition 16 MILLION jobs in the weeks since.https://t.co/KenSC389WT
Softer UK Services PMI Drags GBP/USD Exchange Rate Lower
Support for Pound Sterling (GBP) proved generally limited in the wake of March’s finalised UK services PMI, which saw a modest negative revision.
As the index delivered its worst month on record, slipping to just 34.5, this highlighted the high odds of a sharp first quarter gross domestic product contraction.
With the service sector looking set to remain under pressure for some time to come, thanks to the ongoing Covid-19 shutdown, hopes of an economic rebound proved slim.
Monday’s UK construction PMI could put additional pressure on GBP exchange rates, with forecasts pointing towards a similar monthly deterioration in sector activity.
As long as the economy remains on course to lose significant momentum in the first half of 2020 any upside potential of the Pound is likely to prove limited.
US Dollar Gains Set to Ease Ahead of FOMC Meeting Minutes Release
With worries over the health of the global economy lingering the US Dollar may continue to benefit from safe-haven demand over the coming weeks.
However, any marked improvement in investor sentiment could easily see USD exchange rates shedding some of their recent gains.
If markets find any sufficient cause for confidence in the global outlook the US Dollar could stumble, finally coming under the weight of recent negative domestic data.
The release of the Federal Open Market Committee’s (FOMC) most recent set of meeting minutes may also put a dampener on USD exchange rates on Wednesday.
While the minutes will not reflect the poor run of labour market data seen in the last week investors are still keen to gauge the outlook of policymakers.
Any indication that the central bank remains ready to act and deliver further monetary loosening measures may push the US Dollar lower across the board.
If further government fiscal stimulus action appears possible this could equally offer a rallying point to the GBP/USD exchange rate.