GBP/USD U.S. Jobs Data May Seal the Deal on June Rate Hike and Boost Dollar
  • Pound (GBP) investors are growing increasingly concerned over the health of the UK labour market
  • Brexit deadlock continues ahead of the 8th round of talks next week
  • US Dollar (USD) look to the non-farm payroll report, 1.4 million new hires in August are expected
  • Unemployment could fall below 10%

After two consecutive sessions of declines, the Pound US Dollar (GBP/USD) exchange rate is holding steady on Friday. The pair settled -0.5% on Thursday at US$1.3280. At 06:15 UTC, GBP/USD is at the same level. Across the week the pair is on track to shed -0.5% after 2% gains across the previous week.

The Pound came under pressure in the previous session after the composite IHS Markit CIPS Composite PMI, a survey which gauges activity in the service, manufacturing and construction sectors, increased to a 6 year high in August at 59.1. However, concerningly, the employment component of the survey dropped for the first time since May.

With the government furlough scheme, which supported 10 million people, coming to an end in October, concerns are growing over the health of the labour market.

Brexit is another point of concern for Pound investors, as the 8th round of trade talks are due to start next week. UK fishing waters continue to be a point of contention. Demands from Boris Johnson that UK fisherman double the size of their catch has been criticized by Michel Barnier, Chief EU negotiator. The deadlock increases the chances of no trade deal being reached.

The US labour market has been in focus all week, culminating today with the release of the US non-farm payroll. Analysts are expecting 1.4 million new jobs to have been created in August, after adding 1.76 million in July. The unemployment rate is expected to drop into single digits to 9.8%, down from 10.2%.

The closely watched non-farm payroll jobs report comes following several releases across the week which economists consider to be lead indicators. The employment comment of the IS manufacturing and non-manufacturing reports both showed a contraction. The ADP private payrolls also saw fewer job hires than expected. These releases suggest that the non-farm payrolls headline figure could disappoint today. This could drag on the US Dollar.