Tom Holian
Dealing Director
US Jobs data to set the tone for the US Dollar
US Non-Farm Payroll data out this afternoon. A figure of 185,000 is expected, any increase on this is likely to lead to dollar strength.
Request a quoteThe US dollar has been going from strength to strength during the last few weeks against both the euro and the pound, following a number of interest rate hikes so far this year, with another rate hike expected before the end of this year.
| Currency Pair | % Change in 1 month | Difference on £200,000 | |
|---|---|---|---|
 GBP |  USD | 2.1% | $5,600 |
US Initial Jobless Claims came out better than expected yesterday afternoon, and Factory Orders for August came out at 2.3% compared to the expectation of 2.1%. This led to the dollar strengthening back towards 1.30 against the pound during yesterday’s trading session.
Later on today the US will release its latest set of Non-Farm Payroll data which is notoriously difficult to predict. The expectation for later today is a figure of 185,000 so any increase on this could see further dollar strength.
With US unemployment at record low levels of just 3.9% last month, if the figure comes in at the expected 3.8% this could also provide support in favour of a further interest rate hike before the end of the year. This is why I think we could see GBPUSD exchange rates drop below 1.30 during this afternoon’s trading session.
Further Interest Rate hikes ahead in the US?
US Fed Chairman Jerome Powell spoke yesterday afternoon and indicated that further rate hikes are coming. The current expectation is for another one by the end of this year, but as yet nothing has been suggested for 2019. He hinted however that the Central Bank will need to move from ‘neutral’ to ‘normal’ in terms of their monetary policy.
This helped the dollar to strengthen during yesterday afternoon and I think we could see further dollar strength ahead. The pound is still under a lot of pressure caused by the uncertainty of Brexit, and with an absence of any interest rate hikes in the UK coming anytime soon I think global investors will continue to seek the safe haven of the dollar and keep it very strong.
Therefore, if you’re planning to buy US dollars it may be worth getting this organised in the near future especially whilst the Brexit talks continue to remain at a stalemate.
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