GBP/USD Edges Up Despite Strong US Labor Data

GBP/USD extended yesterday gains as no-deal Brexit fears paused for a while, with most Britons shifting focus to Christmas holidays. Both the UK and US markets are closed on Boxing Day.

Currently, the pair is trading at 1.2990, up 0.23% as of 3:20 PM UTC. The sterling started to recover late on Monday, after experiencing one of the worst weeks in years, losing over 3% against the Greenback.

While the pound started well during the UK election day, with UK Prime Minister Boris Johnson’s Conservative Party winning majority, the currency began to tumble after the PM expressed his intention to rule out any effort to extend the Brexit transition period beyond December 2020. Analysts are worried that such a tight timeline for reaching a trade deal with European Union might not be sufficient, which leaves room for a no-deal Brexit.

The bears have been celebrating these days, and the pound had the chance to recover some losses on low trading volumes.

Interestingly, the pound continues to strengthen against the American currency despite strong labor market data. Just recently, the US Labor Department said that the number of US citizens filing applications for unemployment benefits declined last week by 13,000 to a seasonally adjusted 222,000. Analysts surveyed by Reuters expected a decline to 224,000.

The four-week moving average of jobless claims, which is regarded as a more accurate measure of labor market trends, rose 2,250 to 228,000.

Last month, the US unemployment rate got back to 3.5%, which is the lowest figure in about 50 years.

A strong labor market underpins household spending, pushing the US economy for a moderate growth despite negative effects from slowing global economic growth and trade tensions.

The good news for the US economy is that trade tensions have eased, as Washington and Beijing are about to sign the historic phase one trade deal. On Tuesday, US President Donald Trump said he and Chinese counterpart Xi Jinping would have a signing ceremony. Yesterday, Chinese Foreign Ministry confirmed Trump’s message and said that both countries were in close communication. He said:

“Both sides’ economic and trade teams are in close communication about detailed arrangements for the deal’s signing and other follow-up work.”

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