GBP USD Exchange Rate Spirals After Weak Non-Farm Payroll Reading, GBP EUR Slumps Following Bond Purchase Announcement

Modified: Friday, 7 September 2012 14:56 BST - Written by David Woodsmith

STORY LINK GBP USD Exchange Rate Spirals After Weak Non-Farm Payroll Reading, GBP EUR Slumps Following Bond Purchase Announcement

The global currency market’s two ‘major’ majors have seen major price action during today’s European afternoon session. The euro has made significant gains against Sterling on the day, sending the GBP EUR exchange rate down as low as 1.2506 earlier on. The move lower was partly attributable to a delayed reaction from investors to yesterday’s landmark announcement by ECB President Mario Draghi that his Bank would be undertaking extensive bond purchase activities in the short-to-medium term. This has the dual benefit for the single currency of alleviating the immediate threat of a multiple sovereign debt defaults occurring and of improving general investor sentiment. In recent times, the euro has proved itself far more sensitive to risk than the Pound, which is increasingly taking on the attributes of a reserve currency. This meant the forward move in global shares has increased positivity towards Europe’s tender.

Meanwhile, on the other side of the Pond, this afternoon’s eagerly-awaited August Non-Farm Payrolls data provided a shock to analysts by printing at 96,000 – way below expectations of a 130,000 showing. July’s counterpart number was also downwardly revised to 162,000, coming as an additional blow to the giant US economy. There had been significant optimism regarding the key US labour market figure following yesterday’s better-than-anticipated ADP Employment Change data for last month. The immediate effect of today’s disappointing release was to trigger a sharp bout of selling pressure on the Greenback, as institutional investors priced-in a higher percentage chance that the US Federal Reserve will announce a third tranche of Quantitative Easing next week. These concerns have caused a generalised move out of Dollar-denominated assets, sending the GBP USD rate up to the edge of the 1.6000s once more.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: American Dollar Forecasts Currency Predictions Dollar Poun Forecasts