Mixed US unemployment data stunts the probability of a hike until later in the year whilst the EU referendum continues to weigh heavily on Sterling. It looks as though any GBPUSD strength may not happen until after the referendum on the assumption that Britain vote to remain.
Friday afternoon saw a mixed run of Unemployment data which I believe will lead the Fed to rethink any planned hikes at this stage. Any slim chance of a rate hike this month which would have helped strengthen the dollar have been put back further possibly into September. Whilst the Unemployment rate fell to 4.7% from 5% the number of new jobs being created was much lower than expected. The Federal Reserve have closely linked the raising of interest rates in the US to the health of the jobs market.
Janet Yellen is speaking today and having mentioned two weeks ago a summer hike was a ‘possibility’ seems bound to suggest this will now be later in the year which could weaken further the dollar. September seems the most likely since the Fed are bound to want to see at least two successive months of good data to warrant the hike. So even if July’s data is impressive it is unlikely a move would happen before September.
Unfortunately the pushing back of US Interest rate expectations has not helped anyone who needs to buy dollars with pounds. It seems that if you have dollars to buy with sterling moving sooner ahead of the Referendum is a good move since the pound is likely to drop further. There is of course the chance of a Remain vote leading to GBP strength after the vote but nothing can be taken for granted. What seems likely is that USD sellers for pounds will have further opportunities ahead of the Referendum. There are no top tier US data releases this week but further fallout from Friday jobs data might see the dollar slightly weaker against most currencies. As we can see from trading so far this morning this with the pound however, the Brexit vote is the big issue dominating GBPUSD and it seems the pound will continue to struggle.
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