Pound sterling rises versus the US dollar as reduced US job openings in July increase the likelihood that the Fed would choose for a significant interest rate drop.
On Thursday, the pound sterling (GBP) outperformed its major counterparts. The British pound appreciates as the positive economic outlook for the United Kingdom (UK) raises market expectations that the Bank of England (BoE) policy-easing cycle will be shorter this year than that of other central banks.
The final estimate for S&P Global/CIPS PMI data announced on Wednesday. that overall economic activity in the UK increased at a quicker rate in August. According to survey data, activity increased at its quickest rate since April, spurred by a robust gain in both manufacturing and the services sector.
Investors expect the BoE to leave interest rates unchanged at 5% at this month’s meeting.
Financial market players expect the BoE to decrease interest rates only once in the rest of the year. In August, the Bank of England shifted its focus to policy normalization. The central bank projected to keep interest rates constant at 5% this month. And markets anticipate another cut in November or December.
The pound sterling will be influenced by market sentiment and anticipation of BoE interest rate decreases in the absence of UK top-tier economic data. Next week, investors will concentrate on the Employment statistics for the Quarterly and monthly Gross Domestic Product (GDP) data for July.
Daily Market movers: Pound Sterling improves vs the US dollar.
In Thursday’s London session, the pound sterling rose beyond 1.3150 against the US dollar (USD). The GBP/USD pair hopes to prolong Wednesday’s recovery after the US Dollar (USD) suffered a setback due to dismal JOLTS Job Openings data in July. The US Dollar Index (DXY), which measures the value of the US dollar against six major currencies, has fallen to approximately 101.00.
Weak US job vacancy data raises concerns about labor market conditions
According to the Job Openings statistics issued on Wednesday, the number of new job openings posted by US firms was 7.67 million, the lowest level in more than three and a half years. Signs of a weakening job market reinforced fears that the The Federal Reserve (Fed) might begin the policy-easing process aggressively.
According to the CME FedWatch tool, the probability that the Fed will begin lowering interest rates by 50 basis points (bps) to 4.75%-5.00% at the September meeting has grown to 41% from 34% a week ago.
Going forward, the US Nonfarm Payrolls (NFP) data for August, which will be released on Friday, will be the primary catalyst for the US Dollar. The relevance of US labor market data has grown dramatically, as the Fed looks to be more concerned with preventing job losses, despite mounting signs that inflationary pressures are on pace to return to the bank’s target of 2%.
During Thursday’s North American session, investors will concentrate on ADP Employment Change and ISM Services Purchasing Managers’ Index (PMI) for August. The initial jobless claims figures for the week ending August 30th will also be crucial.
