Go-Ahead US Jobs Data Hit GBP USD Exchange Rate Forecast

August 5, 2016 - Written by Toni Johnson

STORY LINK Go-Ahead US Jobs Data Hit GBP USD Exchange Rate Forecast

Better-than-Forecast US Jobs Data Sends Pound to US Dollar Exchange Rate Lower

Strong US job creation data, out a short time ago, printed well above analysts’ expectations, sending the US Dollar (currency : USD) stronger across the board. Analysts had been looking for the US Non-Farm Payrolls data to show that 180,000 new jobs had been generated in the States last month. The result of 255,000, building on June’s showing of 287,000 therefore suggested that America’s labour market is right back on track following a pronounced wobble in May.

Chris Williamson, chief economist at IHS Markit, put his own spin on the keynote figure earlier on today, stating that,

‘The steady job market improvement keeps alive the possibility of the Fed hiking rates again this year, but worries about sluggish economic growth and deteriorating productivity, as well as uncertainty created by the presidential election, suggests that any tightening of policy will be delayed until December.’

US GDP Prospects Could Inspire 2016 Interest Rate Hike

David Page of AXA Investment Managers echoed these thoughts, stating a short time ago that,

‘Another solid payrolls continues to suggest a firmer underlying GDP expansion than recorded in Q2 GDP. This is consistent with the Federal Open Market Committee’s latest guidance that “near-term risks … diminished”. We expect Q3 GDP to record a solid rebound to Q2’s inventory-correction impacted growth. We think this will increase the Fed’s confidence to tighten policy. We consider this unlikely before November’s elections (although we expect the probability of a September hike to grow in market’s minds). We forecast a 0.25% December hike.’

US Rate Hike Projections May Limit US Dollar's Bullish Run

A general consensus appears to be forming that following June’s Brexit vote in the UK and with November’s US Presidential Election fast approaching, there is little chance that the Fed will hike its headline interest rate until its December meeting. However, futures markets are currently pricing-in a likelihood that American interest rates will remain at their current banding of 25-50 basis points even after December’s Fed get-together. This fact is forecast to curb the potential losses for the GBP USD exchange rate into the medium term.

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