Pound Dollar Exchange Rate Surges as US Jobs Data Falls Short

September 5, 2024 - Written by John Cameron

STORY LINK Pound Dollar Exchange Rate Surges as US Jobs Data Falls Short

The Pound US Dollar (GBP/USD) exchange rate climbed higher on Wednesday, driven by disappointing US employment data.

At the time of writing, GBP/USD was trading around $1.3156, marking an approximate 0.3% increase from the day’s opening levels.

The US Dollar (USD) slumped on Wednesday following the release of a weaker-than-expected JOLTs job openings report.

The report indicated that the US economy had 7.637 million job openings in July, falling short of market expectations of 8.1 million and down from the previous month’s revised 7.97 million. This data fuelled concerns about the weakening US labour market, reinforcing speculation that the Federal Reserve may need to initiate a more aggressive monetary easing cycle in the coming months to counteract the economic slowdown and labour market weaknesses.

Additionally, improved market sentiment exerted further downward pressure on the USD due to its safe-haven appeal.

The Pound (GBP) edged higher against several of its counterparts on Wednesday, buoyed by an improving market mood. A stronger-than-expected final services PMI in the UK also provided support for GBP.

The final services index in the UK surpassed market expectations of 53.3, rising to 53.7 in August, and improving on the previous month’s 52.5. This data highlighted the fastest growth in the UK’s key service sector since May.

Tim Moore, Economics Director at S&P Global Market Intelligence, commented:

‘August data highlighted a recovery in UK service sector performance as improving economic conditions and domestic political stability helped to bolster customer demand. New business again increased at a robust pace after a lull in decision-making earlier this summer. This fueled the fastest upturn in service sector activity since April and extended the current period of growth to ten months.

This data confirmed ongoing momentum in the sector, signalling that UK private sector growth continues to rebound this year.

The strong reading also suggests that the Bank of England (BoE) may have more flexibility to delay further monetary easing in the near term. This could reduce the likelihood of imminent interest rate cuts, providing additional support for GBP against its rivals, amid speculation that the BoE might pursue a less aggressive policy easing strategy compared to other major central banks.

GBP/USD Exchange Rate Outlook: Focus on US Employment Data

Looking ahead, the upcoming US initial jobless claims report, set for release on Thursday afternoon, will be closely watched. Economists anticipate the data to remain relatively unchanged from the previous week, with a slight decrease expected in new unemployment benefit claims to 230,000. If the data meets expectations, hovering near a multi-month high, concerns about the US labour market’s health may continue to weigh on the USD.

Additionally, the latest ADP employment change report is due for release in the US. A projected increase of 145,000 new jobs added to US payrolls in July could help the ‘greenback’ recover some of its losses, potentially easing concerns over the US employment situation.
In the UK, with few significant domestic data releases on the horizon, the risk-sensitive Pound may be more susceptible to global market sentiment. A positive market mood could boost GBP against its safer counterparts, while a downturn in sentiment might Favor the safe-haven USD.

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TAGS: Pound Dollar Forecasts