- With no UK economic data to grab investor’s attention, the pound drifted lower on Thursday on no trade deal Brexit fears
- The non-farm payroll (NFP) is the US Labour Department’s broadest analysis of the US labour market
The pound drifted lower versus the US dollar for a second straight session on Thursday. The pound US dollar exchange rate declined 0.5% hitting a low of US$1.2923, its weakest level since before the UK election. Brexit fears and broad US dollar strength drove the pair.
GBP/USD is holding steady in early trade on Friday as investors look ahead to the US non-farm payroll.
Pound
Recent signals from the European Union suggest that its demand for continued access to British fishing waters could be played off against the UK financial services access to the bloc. This has spooked investors triggering alarm in the City of London and among pound traders.
Today the focus is expected to remain on the future UK – EU trade relationship. Boris Johnson’s hard -headed negotiating stance could continue to weigh on sentiment. Pound investors fear that the UK economy could experience a sharp slowdown in the case that no trade deal is agreed with the EU.
Dollar
It is the most closely watched US macro data point each month. After a week of upbeat data releases investors are looking towards the US non-farm payroll release with high expectations. The forecast is for 160,000 jobs to have been created in January, following December’s 145,000. Analysts are expecting the unemployment rate to remain stable at 3.5% and hourly earnings to rise 0.3% after a 0.1% increase in December.
The ADP private payroll release smashed expectations on Wednesday, with the highest number of jobs created in the private sector in half a decade. The ADP report is considered a lead indicator for the non-farm payroll. The employment component in the ISM manufacturing report was also upbeat, pointing to strong NFP figures. However, the employment component in the ISM service sector report was less encouraging, meaning that it is harder to decipher whether the NFP will beat expectations or not. A strong reading could help boost optimism surrounding the US economy, lifting the dollar.
