Pound Dollar Exchange Rate Trended Lower after Strong US Employment Data

November 30, 2016 - Written by Toni Johnson

STORY LINK Pound Dollar Exchange Rate Trended Lower after Strong US Employment Data

Pound Demand Limited by Weaker Consumer Confidence Index

Disappointingly, the GfK consumer confidence survey for November indicated a further weakening of sentiment from -3 to -8, limiting the appeal of Pound Sterling (GBP) on Wednesday.

This somewhat undermined the bullishness of October’s mortgage approvals and net consumer credit figures, undoing some of the boost that the GBP exchange rate complex had experienced yesterday.

Investors were further discouraged by the Bank of England’s (BoE) Financial Stability Report, which highlighted the persistent global risks that could damage the UK’s financial sector in the coming year.

As Governor Mark Carney also warned of the uncertainty created by the government’s lack of clarity over its position on Brexit negotiations the Pound US Dollar (GBP USD) exchange rate extended its slump.

Solid ADP Employment Data Raised Hopes for US Non-Farm Payrolls

Confidence in the US Dollar (USD), meanwhile, was boosted by a stronger-than-expected ADP employment change figure for November, as 216,000 rather than 170,000 jobs were added on the month.

This would seem to bode well for the upcoming Non-Farm Payrolls report, which is forecast to demonstrate continued robustness within the US labour market on Friday.

As a result the case for the Federal Reserve to raise interest rates at its December meeting appears to remain strong, maintaining the US Dollar’s recent upside bias.

Although the latest personal spending data proved to be a little less encouraging this was not enough to boost the GBP USD exchange rate.

GBP USD Exchange Rate Could Benefit from Stronger Chinese Data

The ISM manufacturing index is expected to generate further support for the ‘Greenback’ on Thursday, with the measure predicted to have strengthened from 51.9 to 52.2.

However, if the latest Chinese PMIs continue to point towards a more robust economy then the appeal of the US Dollar could be limited by a resurgence in market risk appetite.

As researchers at the Bank of America Merrill Lynch noted:

‘Overall USD positioning does not looked stretched, but there is a risk that some hedge fund longs are trimmed considering the speed of the move since the election and the lower conviction seen in the flows. With no changes to the fundamental outlook for higher US rates and higher USD, we would consider any pullback to be a buying opportunity.’

Upward momentum for the GBP USD exchange rate could be boosted by the Nationwide house price data for November, as any confirmation of the housing market’s continued strength would be a positive sign.

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