Pound / Dollar: GBP/USD Support @ 1.55 Threatened After Non-Farm Data
- Written by: Gary Howes
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The British pound is on the defensive against the United states dollar as we head into the new week.
The greenback soared higher after it was revealed that US Non-Farm Payrolls smashed expectations by reading at 321 000. Analysts had only positioned the dollar for the addition of 230 000 people to the workforce.
The dollar-buying spree confirms markets believe the data opens the doors to a mid-2015 interest rate rise at the US Federal Reserve.
The ability of GBP to defend current levels will be incredibly important for the immediate outlook against the US currency.
- The British pound to US dollar exchange rate (GBP/USD) reached 1.5584.
- The euro to US dollar exchange rate (EUR/USD) is at 1.2289.
- The US dollar to Canadian dollar (USD/CAD) exchange rate is 0.25 pct higher at 1.1441.
Be Aware: The above quotes are taken from the wholesale market and your bank will affix a spread at their discretion. However, an independent FX provider will guarantee to undercut your bank’s offer, thereby delivering up to 5% more currency.
To gaurd against currency fluctuations we recommend discussing a trading strategy whereby optimal levels are automatically executed.
Will Support Hold?
The outlook for the pound against the dollar will be decided by the ability of the support level at 1.55 GBP/USD to hold:
As we can see the level has provided significant support over the recent past and that the USD has failed to break lower should be seen as a positive by those hoping for a stronger pound sterling.
Indeed, we are of the opinion if sterling can weather the current storm the potential for a more meaningful recovery will be possible.
A break through here in the next week could form the next leg of the race lower to 1.50.
Reaction to December's Non-Farm Payroll Data
This is the 10th month running that America has now created at least 200,00 new jobs.
That’s the best stretch since 1994.
- Rob Carnell of Dutch bank ING says the hawkish members of the Federal Reserve may be heartened by the 321,000 surge in US employment last month:
"There is no doubt that this is an impressive figure, and will give the hawks at the Fed a bit more fire in their bellies at the next FOMC meeting. But the detail of the release is a bit less impressive on further inspection.
"The household survey rose only 4,000. And as a result, the unemployment rate went nowhere, staying at 5.8%."
- Peter Elston, Global Investment Strategist at Seneca Investment Managers, may be of use:
"Non-farm payrolls came in considerably stronger than expected in November.
"The fact wages grew at a stronger rate should offer a further fillip to markets.
"The big question is whether this represents the start of a return to the sort of consistently strong numbers we saw in the late 90s, or is simply a blip.
"In light of the recent fall in the oil price, which will have a positive impact on aggregate demand, the chances of further improvement are higher than they were back in June.
"That said, we are now in the sixth year of the recovery and it’s surprising, given all the monetary stimulus, that employment growth has not been stronger.
"There have been structural as well as cyclical forces at work in recent years.
"Whether the economy is strong enough to absorb the ending, in October, of the Fed’s bond buying program is yet to be seen."
- Dennis de Jong, managing director at UFX.com, comments on US nonfarm payrolls
“Despite data from the IMF suggesting China now makes up a larger portion of the world economy, today’s remarkably positive nonfarm payrolls figures indicates that the US is in a rather nice position at present.
“Wages are rising as well so the Fed will hope that, with more money in the wallets of the US people, the holiday season will bring renewed growth.
“Today’s data is likely to result in further support for the US dollar, particularly against the embattled euro after yesterday’s pessimistic outlook from the ECB.”
