{"id":5624,"date":"2019-07-08T00:00:00","date_gmt":"2019-07-08T04:00:00","guid":{"rendered":"https:\/\/currencylive.com\/101050-gbp-usd-strong-non-farm-payroll\/"},"modified":"2019-07-08T00:00:00","modified_gmt":"2019-07-08T04:00:00","slug":"101050-gbp-usd-strong-non-farm-payroll","status":"publish","type":"post","link":"https:\/\/currencylive.com\/news\/101050-gbp-usd-strong-non-farm-payroll\/","title":{"rendered":"GBP\/USD: Dollar Rallies On Reduced Rate Cut Expectations"},"content":{"rendered":"<p>A combination of strong US data and concerns over the health of the U.K. economy, sent the pound US dollar exchange rate tumbling over 1.3% across the previous week. The rate hit a nadir of US$1.2481 on Friday. This is the lowest level that the pound US dollar exchange rate has traded at since January.<\/p>\n<table class=\"table table-bordered\">\n<tr>\n<th><small> What do these figures mean? <\/small><\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td><small> 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:<em>1 GBP = 1.28934 USD<\/em>Here, \u00a31 is equivalent to approximately $1.29. This specifically measures the pound\u2019s worth against the dollar. If the US dollar amount increases in this pairing, it\u2019s positive for the pound. Or, if you were looking at it the other way around:<em>1 USD = 0.77786 GBP<\/em>In this example, $1 is equivalent to approximately \u00a30.78. This measures the US dollar\u2019s worth versus the British pound. If the sterling number gets larger, it\u2019s good news for the dollar. <\/small><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Concerns over the health of the U.K. economy dominated following a hat-trick of weak pmi figures across the previous week. The UK economy is almost certain to have experienced a contraction in the second quarter and is potentially heading for a recession by the third quarter. A recession is two straight quarters of contraction.<\/p>\n<p>Pressure is mounting on the Bank of England (BoE) to adopt a more dovish monetary policy and consider cutting interest rates in order to support the UK\u2019s slowing economy. The BoE has signalled that it is now more likely to cut interest rates than hike them.<\/p>\n<table class=\"table table-bordered\">\n<tr>\n<th><small> Why do interest rate cuts drag on a currency\u2019s value? <\/small><\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td><small> Interest rates are key to understanding exchange rate movements. Those who have large sums of money to invest want the highest return on their investments. Lower interest rate environments tend to offer lower yields. So, if the interest rate or at least the interest rate expectation of a country is relatively lower compared to another, then foreign investors look to pull their capital out and invest elsewhere. Large corporations and investors sell out of local currency to invest elsewhere. More local currency is available as the demand of that currency declines, dragging the value lower. <\/small><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Also hitting demand for the pound, investors are growing increasingly nervous over the prospect of a no deal Brexit. Economists have frequently warned over the damaging impact that a no deal Brexit could have on the UK economy. Both Conservative leadership candidates Boris Johnson and Jeremy Hunt have said that they are willing to let the UK of the EU without a deal if necessary. The results of the Tory leadership battle will be announced late July.<\/p>\n<p>This week investors will continue focusing on the likelihood of the BoE easing monetary policy. UK data, particularly Wednesdays GDP, manufacturing and industrial production, will be in focus.<\/p>\n<h2><a href=\"#dollar-rallies-on-reduced-rate-cut-expectations\" id=\"dollar-rallies-on-reduced-rate-cut-expectations\"><\/a>Dollar Rallies On Reduced Rate Cut Expectations<\/h2>\n<p>The dollar rallied on Friday and continues to move higher in early trade on Monday as investors digest the strong US jobs report. The closely watched non-farm payroll smashed expectations. 224,000 jobs were created in June, well ahead of the 164,000 that analysts had forecast.<\/p>\n<p>The strong reading shows that the US economy is holding up much better than what investors thought. As a result, dollar investors have scaled back their expectations of an interest rate cut by the Fed in the July meeting. This has pushed the dollar higher.<\/p>\n<table class=\"table table-bordered\">\n<tr>\n<th><small> How does the non-farm payroll (NFP) affect the US dollar? <\/small><\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td><small> It works like this, when there is low unemployment and high job creation, the demand for workers increases. As demand for workers goes up, wages for those workers also go up. Which means the workers are now taking home more money to spend on cars, houses or in the shops. As a result, demand for goods and services also increase, pushing the prices of the goods and services higher. That\u2019s also known as inflation. When inflation moves higher, central banks are more likely to raise interest rates, which then pushes up the currency\u2019s worth. <\/small><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>The US economic calendar is fairly quiet at the start of this week. Investors will be looking towards the Federal Reserve Chairman\u2019s appearance and speech on Wednesday for further clues as to the next move by the Fed.<\/p>\n<hr>\n<p><small><\/p>\n<p><small><em><br \/>\nThis publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Inc., Currency Live or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. Consult our <a href=\"https:\/\/currencylive.com\/risk-warning\/\">risk warning<\/a> page for more details.<\/em><\/small><\/p>\n<p><small><em>This article was initially published on TransferWise.com from the same author. The content at Currency Live is the sole opinion of the authors and in no way reflects the views of TransferWise Inc.<\/em><\/small><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A combination of strong US data and concerns over the health of the U.K. economy, sent the pound US dollar exchange rate tumbling over 1.3% across the previous week. The rate hit a nadir of US$1.2481 on Friday. This is the lowest level that the pound US dollar exchange rate has traded at since January. [&hellip;]<\/p>\n","protected":false},"author":163946597,"featured_media":5625,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1379,1381],"tags":[1394,1398],"class_list":["post-5624","post","type-post","status-publish","format-standard","has-post-thumbnail","category-gbp","category-usd","tag-gbp","tag-usd"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.0 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>GBP\/USD: Dollar Rallies On Reduced Rate Cut Expectations - Currency Live<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/currencylive.com\/news\/101050-gbp-usd-strong-non-farm-payroll\/\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Fiona Cincotta\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/101050-gbp-usd-strong-non-farm-payroll\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/101050-gbp-usd-strong-non-farm-payroll\\\/\"},\"author\":{\"name\":\"Fiona Cincotta\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/#\\\/schema\\\/person\\\/8ef0fafb6c93f1204150bb907b42cfec\"},\"headline\":\"GBP\\\/USD: Dollar Rallies On Reduced Rate Cut Expectations\",\"datePublished\":\"2019-07-08T04:00:00+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/101050-gbp-usd-strong-non-farm-payroll\\\/\"},\"wordCount\":890,\"image\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/101050-gbp-usd-strong-non-farm-payroll\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/currencylive.com\\\/news\\\/wp-content\\\/uploads\\\/2019\\\/08\\\/100653-gbp-usd-strong-non-farm-payroll.jpg\",\"keywords\":[\"gbp\",\"usd\"],\"articleSection\":[\"GBP\",\"USD\"],\"inLanguage\":\"en-US\",\"copyrightYear\":\"2019\",\"copyrightHolder\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/#organization\"}},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/101050-gbp-usd-strong-non-farm-payroll\\\/\",\"url\":\"https:\\\/\\\/currencylive.com\\\/news\\\/101050-gbp-usd-strong-non-farm-payroll\\\/\",\"name\":\"GBP\\\/USD: Dollar Rallies On Reduced Rate Cut Expectations - 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