ExchangeRates.org.uk - The US Dollar (USD) tumbled on Wednesday following a significantly lower-than-forecast JOLTs job openings report. The release revealed that the US economy had 7.637 million job openings in July, falling below market estimates of 8.1 million, and retreating from the previous month’s downwardly revised 7.97 million. The data served to reinforce concerns of a deteriorating US labour market, thereby further solidifying speculation that the Federal Reserve will likely enact an aggressive monetary-easing cycle in the coming months in order to combat economic slowing and weakness in the domestic labour market. Meanwhile, an improving market sentiment further pressured USD due to the currency’s safe-haven status.
Pound (GBP) Lifted by Services Growth
The increasingly risk-sensitive Pound (GBP) posted modest gains against some of its rivals on Wednesday amid an improving market mood. Additionally, a stronger-than-forecast finalised services PMI in the UK lent GBP additional support. The finalised services index in the UK exceeded market expectations of 53.3, rising to 53.7 in August, and surpassing the previous month’s reading of 52.5. The release also pointed to the fastest acceleration in the vital UK sector since May this year.
Tim Moore, Economics Director at S&P Global Market Intelligence, said: ‘August data highlighted a recovery in UK service sector performance as improving economic conditions and domestic political stability helped to bolster customer demand. New business again increased at a robust pace after a lull in decision-making earlier this summer. This fuelled the fastest upturn in service sector activity since April and extended the current period of growth to ten months.’
The data concretely signalled continually increased momentum within the sector, indicating that UK private sector growth continues to recover this year. Additionally, the robust reading further reinforces that the Bank of England (BoE) may have more scope to defer further monetary loosening in the near term, enabling pared back interest rate cut bets to buoy GBP against its rivals, amid speculation that the bank could deliver a less aggressive policy-easing cycle than that of other major central banks in the near term.
GBP/USD Exchange Rate Forecast: US Employment Data in Focus
Looking ahead, the latest US initial jobless claims report is due for release in the US on Thursday afternoon. Economists expect the data to remain little changed from the previous week’s report, forecasting only a minor downtick in the number of newly unemployed US citizens claiming benefits to 230,000. Should the data print as forecast, holding close to a multi-month high, ongoing concern about the health of the US labour market may leave USD on the backfoot. Additionally, the latest American ADP employment change data is due for release. A forecast uptick to 145,000 new workers added to US payrolls in July may enable the ‘greenback’ to recoup some of its previous losses, perhaps quelling concerns of easing US employment. Looking to the UK, a lack of notable US releases in the near term could see the riskier Pound left vulnerable to global risk dynamics. A prevailing market mood could lift GBP against its safer rivals, while gloomy trade could see the safe-haven ‘greenback’ take precedent.
This content was originally published on ExchangeRates.org.uk
