Pound To Dollar Exchange Rate Eyes 22-Month Low As ?Risk-Off? Environment Prevails Ahead of NFP Data

Published: Friday, 1 June 2012 09:00 BST - Written by David Woodsmith

STORY LINK Pound To Dollar Exchange Rate Eyes 22-Month Low As ?Risk-Off? Environment Prevails Ahead of NFP Data

In the foreign currency markets, one data release stands head and shoulders above the others – the monthly US Non-Farm Payrolls figure – and today marks the day of publication for the latest edition. Last month’s NFP number came in far below analysts’ expectations, printing at a meagre 115,000. This set the tone for Dollar price action for the remainder of May, as institutional investors steered clear of risk-laden assets and pumped their funds into the safe-haven of the US t-bill. This saw the GBP USD exchange rate tumble from close to 1.6300 at the start of the month, all the way down into the 1.53s during yesterday’s European afternoon session.

The omens for this afternoon’s NFP release are not good; yesterday’s session saw May’s US ADP Employment Change figure, considered a reliable indicator of the more significant NFP print, came out below analysts’ expectations to register at 133,000. If the Non-Farm Payrolls number follows suit, then expect the Greenback to garner renewed safe haven support, sending the GBP USD exchange rate downwards towards its 22-month low of 1.5235. A disappointing showing for the NFP number would also be likely to cause a sell-off in high-yielding currencies including the AUD, NZD and ZAR.

Elsewhere, this afternoon’s Canadian GDP growth data for March will also be closely-monitored by investors for clues on how the recent wobble in global economic activity is affecting the export-driven Canadian economy. Analysts are expecting the annualised figure to show a marked increase on February’s counterpart number of 1.6% to show at 1.9%. With such go-ahead predictions, the situation looks set up to provide a disappointment for investors holding CAD-denominated assets. If the GDP number does register at below the anticipated 1.9%, then expect the market to move against the Canadian Dollar, leading to the potential for a break back above the key 1.6000 level for the GBP CAD exchange rate.

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