Pound Sterling Outlook Declines at the End of a Difficult Week

June 3, 2016 - Written by David Woodsmith

STORY LINK Pound Sterling Outlook Declines at the End of a Difficult Week

The Pound has ended the week in a low state, with the accumulated pressures of 'Brexit' news apparently taking their toll on the currency.

Dollar Dives on Weak US Jobs Data

Shock data from the States this afternoon has taken the edge off global investor sentiment and the US Dollar (currency : USD) alike. Currency market analysts had been expecting the latest job creation figures to reveal that 160,000 new positions had been created in the vast American economy last month; when the May Non-Farm Payrolls data came out at a highly disappointing 38,000, investors quickly moved to adjust their positions.

The downward revision to 123,000 for April’s US Non-Farm Payrolls number added insult to injury, and the combined effect saw the market shift out of the Dollar, sending the GBP USD exchange rate back above the 1.4500 threshold.

The one positive for holders of the Buck came in the form of news of a pronounced drop-off in the overall level of joblessness in the States, from April’s 5.0% to a relatively lowly 4.7%.

Notwithstanding this, the upshot is likely to see FX insiders scale back their expectations regarding the likelihood of a US Federal Reserve interest rate hike before the end of Summer. As of yesterday, futures markets were pricing-in a 41.5% chance that the cost of borrowing Stateside will still be at 0.5% after the Fed’s July policy meeting; however, the same futures markets now imply a 62.9% chance that US rates will remain the same come the end of Summer.

UK Services Growth Betters Estimates, GBP Gains

Elsewhere, there was positive news for the Pound Sterling (currency : GBP) this morning, when the latest Markit/CIPS Purchasing Managers' Index (PMI) survey of the UK services sector printed at an above-expectations 53.5.

This represented a significant uplift from last month’s counterpart showing of 52.3. Over three quarters of British economic activity takes place in the tertiary sector, so the result is forecast to provide the Pound with a fair wind as we head towards the 23rd June EU In / Out Referendum.

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TAGS: American Dollar Forecasts Pound Dollar Forecasts Pound Sterling Forecasts