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Pound to Dollar Exchange Rates: GBPUSD Losses Slow despite Stronger than Expected US Jobless Stats

September 3, 2020 - Written by John Cameron

The latest US jobless claims have made investors a little more optimistic ahead of tomorrow’s US Non-Farm Payroll report, but the British Pound to US Dollar (GBP/USD) exchange rate’s fall has been slowing regardless. Investors are hesitant to buy the US Dollar too much ahead of tomorrow’s key data, following this week’s notable US Dollar rebound from its cheapest levels.

The US Dollar’s recovery has been limited, and GBP/USD continues to hold most of last week’s impressive gains. GBP/USD gained over two cents throughout last week, from the level of 1.3089 to 1.3351.

Earlier in the week, GBP/USD touched on a high of 1.3473 – the best level for the pair all year.

However, this high was short-lived as investors piled into buying the US Dollar back from lows. GBP/USD has since shed some of last week’s gains and trends closer to the level of 1.3278 at the time of writing.

GBP Exchange Rates Remain Pressured amid Lack of Strong Support

The Pound has been one of the currencies to benefit most strongly from the US Dollar’s weakness over the past month. It comes as the UK coronavirus outlook is seen as less dire than the US pandemic situation.

However, since the US Dollar began to rebound earlier this week, the Pound has been pushed lower by its recovery.

As Sterling tumbles, investors have been hesitant to stand firm on the British currency due to a lack of fresh support in the UK outlook.

Concerns over Britain’s coronavirus and Brexit outlooks continue to weigh heavily over the Pound – as do fears over how Britain’s economy has been hit by the pandemic.

The Pound’s strength in response to rival weakness is also limited, some analysts say. According to Thu Lan Nguyen, FX Strategist at Commerzbank:

‘Over the past few days Sterling was able to benefit from a EUR and USD weakness. At the same time investors seem to be ignoring idiosyncratic factors,

Things are still not looking great as far as Brexit is concerned,

Following 4 years of Brexit drama the market seems immune to this. However, GBP investors will be unable to ignore the Brexit risk forever,’

Sterling’s appeal was also dampened by some weaker than expected UK services data. UK services came in at 58.8, rather than the expected 60.1.

USD Exchange Rate Rally Slows despite Some Optimism in US Data

The US Dollar has been rebounding strongly since the Euro to US Dollar (EUR/USD) exchange rate hit a 2-year-best earlier in the week. Investors are buying the US currency back from its cheapest levels in profit-taking.

However, while the US Dollar is climbing back from lows, the concerning US coronavirus outlook is limiting the US Dollar’s appeal.

Markets are still overall disappointed with the US handling of the coronavirus pandemic. On top of this, recent US data has been too mixed to give a notable boost to the gloomy US outlook.

Following yesterday’s weaker than expected US job report from ADP, today’s US jobless claims data was better than expected. US productivity was also reportedly better than forecast.

According to Valeria Bednarik, Chief Economist at FXStreet:

‘The US has just published some encouraging employment-related numbers, as Initial Jobless Claims for the week ended August 28 decreased to 881K, the lowest reading since the beginning of lockdowns back in March. Nonfarm Productivity in Q2 improved 10.1%, beating expectations, although Unit Labor Cost in the same quarter was down to 9% from 12.2% in the previous quarter.’

On the other hand though, July’s US trade balance report showed the deficit surging as the US imported more than it exported.

GBP/USD Exchange Rate Forecast: Non-Farm Payroll Report in Focus

The US Dollar has seen a volatile week, starting off falling before seeing a significant recovery rebound attempt.

Recent US data has not been enough to notably influence the US Dollar outlook. However, this is partially because investors are awaiting August’s US Non-Farm Payroll report, due tomorrow.

Mixed US job stats in recent sessions have only made markets more anxious for tomorrow’s data. The data, including US unemployment and job change figures, could be hugely influential for the US Dollar outlook if it surprises investors.

For example, if US unemployment worsens rather than lowering to around 9.8% as expected, the US Dollar could see fresh weakness. This may even help GBP/USD to near its best levels again.

As for the Pound, tomorrow’s UK car sales data and construction PMI stats are unlikely to be hugely influential. Investors may instead await next week’s UK growth stats.

Any surprising developments in coronavirus or Brexit situations could also influence the Pound to US Dollar exchange rate.
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