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Pound US Dollar (GBP/USD) Exchange Rate to Weaken on US Employment and Manufacturing Data?

Pound US Dollar (GBP/USD) Exchange Rate to Drop on Positive US Data?

The Pound (GBP) is struggling to gain against the US Dollar (USD) as the ‘Greenback’ recovers from the shock of Federal Reserve Chairman Jerome Powell’s dovish speech last Friday. The US Dollar is resisting downside pressure despite some weak data earlier this week.

If this afternoon’s data prints at – or greater than – expected, USD could see some tailwinds through the rest of today’s session.

At the time of writing, the Pound US Dollar (GBP/USD) exchange rate is trading at £1.3752, virtually unchanged from today’s opening levels.

US Dollar (USD) to Climb on Upbeat Manufacturing Data?

The US Dollar could enjoy tailwinds today if this afternoon’s manufacturing data demonstrates factory growth. ADP employment data missed expectations by 239K new hires for the month of August, capping upside momentum in the meantime.

Employment data revealed that new jobs created were mostly in hospitality, followed by education and health. According to Nela Richardson, Chief ADP Economist:

‘A decline in new hires, [follows] significant job growth from the first half of the year. Despite the slowdown, job gains are approaching 4 million this year… Service providers continue to lead growth, although the Delta variant creates uncertainty for this sector.’

Nonfarm Payrolls on Friday will reveal the extent of the hiring slowdown, as the number of new workers in the US (excluding farm workers) is expected to reach 750K.

The US Dollar is overcoming investors’ caution, however, as mixed Covid updates and a downbeat Chinese PMI rein in support for the safe-haven Dollar. Amidst economic uncertainty, USD attracts risk-off support.

The ISM manufacturing PMI – a reliable indicator of the US economy – is set to contract slightly on last month, albeit fractionally. If the data resists considerable downside, USD could be bolstered further.

Pound (GBP) to Tumble as Covid Concerns Spark Caution?

The Pound (GBP) is likely to face headwinds today as Covid worries partner with fresh Brexit concerns to inspire a bearish mood.

This morning saw the UK’s Markit/CIPS manufacturing PMI print higher than expected, signalling strong overall expansion: although it was the slowest pace of expansion since March.

GBP is also under pressure from rising cases of and deaths by coronavirus. The UK’s Covid-19 daily case count has risen by 32,181 with virus-led deaths rising by 50, as Britain braces for a final decision on booster shots.

On the Brexit front, ex-Democratic Unionist Party (DUP) leader Arlene Foster raises fears of irreparable economic damage over the Northern Ireland (NI) protocol. The UK also faces criticism over its stubborn resistance to recruiting foreign HGV drivers.

Given a lack of significant data for the remainder of today and tomorrow, further Pound movement is likely to be driven by subsequent Covid news and any political developments regarding Brexit. Additional publicity over supply-chain shortages could also dent Pound sentiment.