Pound Sterling Forecast to Climb vs AUD NZD CAD Following US Jobs Data

Published: Friday, 4 December 2015 14:00 BST - Written by David Woodsmith

STORY LINK Pound Sterling Forecast to Climb vs AUD NZD CAD Following US Jobs Data

Positive US Non-Farm Payrolls Fuels December Fed Rate Hike Bets

As far as futures markets participants are concerned, this afternoon’s go-ahead US jobs data makes a US interest rate hike almost a nailed on certainty for the week preceding Christmas.

Last month’s edition of the closely-monitored US Non-Farm Payroll data in the States showed at a far better than anticipated level and this month’s version followed suit, printing at 211,000 versus estimates of a 200,000 showing.

The official statistics also revealed a pronounced upward revision to 298,000 for last month’s job creation figure and suggested that overall joblessness in the States had remained at a relatively lowly 5.0% during November.

Fed Bets Improve from 70% to 79.1% Following Positive US Data

Before the stellar American jobs numbers, futures markets had been pricing-in just over a 70% chance that the US Federal Reserve would be increasing its benchmark interest rate this month for the first time since the 2007 – 09 global financial crisis.

However, within minutes of the US data, the same futures markets were giving a 79.1% chance of a near-term tightening of policy.

GBP to USD Exchange Rate Settle Above 1.5100 Today

The move which followed in the global currency markets was counter-intuitive, with the Pound Sterling US Dollar exchange rate settling above the 1.5100 GBP USD level, suggesting that some investors had been anticipating slightly strong numbers.

Drilling down into the numbers, BNP Paribas noted that, ‘one downside surprise in the report was that the number of people working part-time involuntarily increased to 6.09 million from 5.77 million, and their share of the labour force also increased, to 3.9% from 3.7% -- likely related to the seasonal retail hiring.’

In terms of quantitative analysis, the jobs figures were good, but looking at them for a qualitative analysis, they were not so good. In spite of this, movement in the VIX ‘Fear Index’ suggested that a move higher in US interest rates is now widely expected.

VIX was lingering in the 14.00s during the middle part of this week but has spiked to above 18.00 this afternoon, hinting that US equities traders are expecting near-term volatility.

The upshot is forecast to see the Pound head Northwards against the Australian Dollar (currency : AUD), New Zealand Dollar (currency : NZD) and Canadian Dollar (currency : CAD).

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