GBP/USD Surges Despite Unappealing U.S. Job Creation Report And Expected Rate Cuts

GBP/USD Surges Despite Unappealing U.S. Job Creation Report And Expected Rate Cuts - USD GBP banknotes
Bill Cascade   NEW 06/06/2019 00:00:00 Forex

The GBP/USD exchange rate experienced a slight uptick on June 5 following the release of poor U.S. job creation data. It may have had a weakening effect on the US dollar, thus the uptick in the exchange rate.

The recently released data revealed that job creation in the U.S. dropped to levels lower than it was during the economic crisis ten years ago. According to Automatic Data Processing, Inc (ADP), the employment change increased by less than the estimated 27,000, after the 275,000 rise reported in May.

ADP releases worrying U.S. employment data

ADP revealed that small businesses in the U.S. slashed about 56,000 jobs in May and small companies only employed about 11,000 people. These figures, plus the current sentiments about the US dollar, are indicators pointing to the slower U.S. economy.

Recent reports also revealed that the manufacturing sector in the U.S. took a hit. Markit manufacturing PMI declined to the 50.5 level. This is the lowest level that the manufacturing PMI has seen in a decade. This data indicates that firms have lost their confidence in the manufacturing sector.

Meanwhile, the GBP has maintained its strength even though it should have taken a hit from Tuesday’s announcement about the declining retail sales in the U.K.

U.K. retail sales reportedly suffered their worst drop since 1995 after an annual 2.7% decline. The retail sales figure reportedly dropped by 3% in May, thus undoing the 3.7% rise that was reported in April.

It was also reported that food sales experienced the first decline since the mid-2016. Helen Dickinson, the CEO of British Retail Consortium (BRC), warned that the market should brace itself for job losses as many stores are expected to shut down.

The GBP holding strong against the USD

Some of the recently released U.K. data would traditionally weaken the GPB against the USD. However, the Pound is going strong, and this could be due to a number of reasons. For example, the USD could be weakening because market experts and traders anticipate interest rate cuts by the Federal Reserve. This would influence investors to hold off on USD investments until things regain stability.

Another key factor that might be making investors shy off from investing in the dollar is the ongoing trade war with China. It has created unfavorable and volatile investment conditions, thus discouraging investors.

The recent surge in the GBP/USD exchange rate would have been more pronounced. Instead, it was limited by the report about the dull outlook of the U.K.'s manufacturing industry. Market experts believe that this is the reason behind the Pound's inability to take full advantage of the USD's weakness on Monday.

Economic fears and the Brexit issue are among the factors that have dragged down the GBP in the past. They are likely to do the same in the future. The current outlook is not looking very good for the GBP and the USD, which have both been the victims of rising geopolitical tensions.







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