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The pound soared higher for the fifth straight session versus the US dollar on Thursday. The pound US dollar exchange rate rallied to a fresh 7 month high of US$1.3167. The pound made a daily gain of 0.4%. This week alone the pound has gained 1.75% versus the dollar. The pound is edging higher in early trade on Friday.
Election fever still grips pound investors. The pound has rallied hard this week as polls show that the Conservatives hold a comfortable lead versus Labour in the upcoming election. Boris Johnson continues to hold a 10-point lead over Jeremy Corbyn. This means that the Conservatives should be on course for an overall majority in Parliament.
Pound investors are linking a Tory majority with progress towards a Brexit deal being pushed through Parliament and the UK leaving the EU by 31st of January. Boris Johnson will face Jeremy Corbyn for another TV debate later today.
NFP 180,000 Jobs In November?
Despite US data coming in broadly better than expected in the previous session, the dollar remained out of favour. This was because investors were preparing themselves for a potentially weaker than forecast non-farm payroll release.
The Labour Department’s non-farm payroll report is the most closely watched macro data release of the month. It is the most complete write up of the US labour market, produced by the Federal government. The Federal Reserve pay close attention to the report given that part of the dual mandate is maximum employment.
Analysts are predicting that 180,000 jobs were created in November, above the 128,000 created in October. However, the lead indicators for the non-farm payroll have disappointed. The ADP private payroll report showed just 67,000 jobs were created in November, short of the 140,000 jobs forecast. The employment components from the ISM manufacturing and non-manufacturing report declined in November. Using these figures, market participants are calculating that the non-farm payroll headline job creation figure could fall short of expectations. This is weighing on demand for the dollar.
The non-farm payroll report is also expected to show that unemployment remained steady at 3.6% and that hourly wages increased slightly by 0.3% in November, up from 0.2% in the previous month. Any weakness could drag the dollar lower.
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| What do these figures mean? |
| When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written: 1 GBP = 1.28934 USD Here, £1 is equivalent to approximately $1.29. This specifically measures the pound’s worth against the dollar. If the US dollar amount increases in this pairing, it’s positive for the pound. Or, if you were looking at it the other way around: 1 USD = 0.77786 GBP In this example, $1 is equivalent to approximately £0.78. This measures the US dollar’s worth versus the British pound. If the sterling number gets larger, it’s good news for the dollar. |
