GBP/USD: Dollar drops as US adds less jobs in December

The British pound rose against the United States dollar on Friday after monthly US payrolls data missed expectations. The pound had been edging higher even before the US data was released as it clawed back sharp losses made on Thursday following comments from Bank of England Governor Mark Carney. Sentiment towards Sterling got a lift overnight when the UK Parliament approved UK Prime Minister Boris John’s Brexit bill.

GBP/USD was higher by 21 pips (+0.16%) to 1.3088 as of 2pm GMT, leaving the currency pair down on the week but off its lows.

Broader market turned a little more sanguine on Friday after the disappointing US non-farm payrolls report, as investors looked to lock in profits after a record-breaking week. On Thursday, stock markets across the globe hit record highs including the S&P 500 and the MSCI global equity index.

The dollar

The US dollar slipped on Friday after the first non-farm payrolls release of the New Year missed expectations. The US created 145,000 jobs in December, a steep drop from the 266,000 in November and below expectations of 164,000. The disappointment in the monthly labour market data did not stop with jobs growth. Wages also slowed with monthly average earnings only rising by 0.1% versus an expectation of 0.3% and below the 0.2% rise reported last month. The US unemployment rate held firm at 30-year lows of 3.1%.

GM workers returning from a strike flattered the November jobs figure so American jobs growth has slid back below 200k in December. A jobs slowdown doesn’t have to be an issue for the dollar when it’s a function of the US economy being close to fully employed and not because of economic weakness.

The pound

The Brexit Withdrawal Agreement bill passed in the House of Commons with a majority of 99 votes. Next week it will move to be voted on in the House of Lords. The big vote in favour of the bill was possible after the large Conservative Party victory in the 2019 general election. Lords will be weary of being seen to frustrate the legislation with lots of new amendments to the bill and it is likely they would be ultimately rejected by the government anyway. That should offer enough time to meet the January 31 Brexit deadline.

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