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Dollar to Pound Sterling Exchange Rates Steady in Anticipation of Major US Non-Farm Payroll Report

March 8, 2019 - Written by James Fuller

As investors sold the Pound since yesterday on fresh Brexit jitters, the sturdy US Dollar has been able to take advantage of this and as a result the US Dollar to Pound (USD/GBP) exchange rate is trending higher towards the end of the week. Demand for the US Dollar cooled a little as investors anticipated this afternoon’s influential US Non-Farm Payroll report.

Since opening this week at the level of 0.7571, USD/GBP has seen a solid rise in demand. Brexit uncertainty has left investors eager to buy safe haven currencies like the US Dollar instead, so USD/GBP has gained over a cent.

On Thursday evening, USD/GBP touched on a weekly high of 0.7650, and the pair trended closer to the level of 0.7641 at the time of writing on Friday.

Investors continued to find the safe haven US Dollar appealing amid signs that other major economies were slowing down, but gains were limited as investors anticipated upcoming US Non-Farm Payroll stats.

USD Exchange Rates Firm as Investors Seek Safe Havens Ahead of US Non-Farm Payroll Report

After weeks of US-China trade hopes making investors more eager to buy risky currencies, this week has seen investors head for safer currencies again as more clarity comes in regarding the ongoing global economic slowdown.

At the beginning of the week, China announced cuts to its growth forecasts.

This was followed throughout the week by a cautious policy decision from the Bank of Canada (BoC), a disappointing Australian growth rate report, and a dovish policy decision from the European Central Bank (ECB).

As major economies around the globe showed increased signs of economic slowdown, investors became more hesitant to take risks and the safe haven US Dollar ended up one of the week’s more appealing currencies.

Federal Reserve interest rates have reached the neutral rate and the US economic outlook is still fairly solid, which has only helped keep the US Dollar appealing compared to its counterparts.

US data has continued to print fairly solidly this week. US jobless claims came in lower than expected yesterday, and the latest Non-Farm productivity report beat forecasts.

GBP Exchange Rates Sold as Brexit Uncertainty Returns

Demand for the Pound was fairly steady towards the beginning of the week, as investors speculated that the UK government would be able to find enough support to pass its Brexit plan through Parliament in an upcoming vote.

However, this demand faded towards the end of the week amid a lack of developments in UK-EU negotiations.

As analysts doubted that any major progress would be made, the Pound tumbled on fresh concerns that the Brexit process would have to be extended with no sign of an actual resolution in sight.

Richard Falkenhall, Senior FX Strategist at SEB, explained the Pound’s lack of drive at the end of the week:

‘With all alternatives still on the table, the most reasonable trading alternative seems to be to just minimise one’s exposure to the Pound and stay away for now,’

USD/GBP Exchange Rate Forecast: US Non-Farm Payroll Report Ahead with Major Brexit Vote on Tuesday

There is still chance for the US Dollar to Pound exchange rate to see a shift in demand at the end of the week, as investors anticipate February’s US Non-Farm Payroll job market report.

The highly influential print is expected to show another month of improvement for the US job market, with wages expected to have rebounded slightly after a slow January.

As the NFP report is a print closely watched by the Federal Reserve, a sudden disappointing release could have a negative impact on the US monetary policy outlook and the US Dollar. In this scenario, USD/GBP could shed some of its weekly gains.

However, if the data is solid and beats expectations it could leave USD/GBP firming higher before markets close for the week.

As for the Pound, investors are of course highly anticipating next Tuesday’s major UK Parliament vote on the government’s Brexit deal.

This will be the biggest event for the Brexit outlook and the US Dollar to Pound exchange rate.
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