Foreign Exchange Update : US Non-Farm Payroll Figure Could Send GBP CHF and GBP USD Lower

June 3, 2011 - Written by John Cameron

STORY LINK Foreign Exchange Update : US Non-Farm Payroll Figure Could Send GBP CHF and GBP USD Lower

The Pound Dollar exchange rate (GBP USD) is 1.6346. The Pound Euro exchange rate (GBP EUR) is 1.1284. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5308.

US Labour Market data releases over the past forty-eight hours have been of a contradictory nature, with Wednesday’s ADP Employment Change number showing that only 38,000 new jobs were created in the States last month versus analysts’ expectations of 175,000 new starts.

However, yesterday’s weekly US employment figures showed a slight reduction in both initial and continuing claims, providing some hope for this afternoon’s key Non-Farm Payrolls figure.

The NFP number is one of the most closely-watched releases of this and any month. Analysts expect that May’s figure will show that 165,000 new jobs have been created in the US non-farm employment sectors. However, with April’s figure showing a massive rise of 244,000 in new non-farm jobs in the states, a low May figure is a distinct possibly, particularly in light of Wednesday’s disappointing US ADP Employment Change number.

A weak US NFP figure would see support for the safe haven currencies, with the Swiss Franc and the US Dollar likely to benefit. The CAD has also picked up support during recent bouts of risk aversion, so a disappointing US labour market print this afternoon could see the GBP CAD exchange rate dip.

Meanwhile, doubt has been cast on the US Dollar’s continuing position as the world economy’s reserve currency of choice following a statement from leading Rating’s Agency Moody’s, released overnight.

Moody’s warned that it might downgrade the US’s debt rating if US policy-makers continue to stall on increasing America’s debt limit from its current level of $14.3tr. The Democratic party have warned that the consequences of a failure to reach a political consensus on raising the limit by 2nd August would be ’catastrophic’ for the US economy. Such an outcome would be likely to force the GBP USD rate break above 1.6746 to its highest level since November 2009.



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