GBP/USD Slumps as US Jobs Report Shatters Expectations
Above (C) Pound Sterling Live 2015.
“How long will sterling buoyancy last? Watch the tone of a Feb. 12 survey from the U.K. central bank on growth and inflation.” – Joe Manimbo at Western Union.
Any notion that the US economy was starting to slow down was dispelled in rude fashion on Friday the 6th of February.
America created 257,000 additional nonfarm payrolls in January, more than forecasts. Unemployment unexpectedly edged up a tick to 5.7% but wages rose 0.5%.
"America's straight-A jobs report sent the markets and the Dollar soaring - with the Greenback spiking 1% against the Euro within minutes,” says David Lamb, senior dealer at the foreign exchange specialists FEXCO.
In the wake of the news the pound sterling slumped lower putting an end to an impressive recovery story.
- The GBP/USD exchange rate recovered off the lows seen at 1.50 at the start of the month to head above the 1.53 point.
- At the time of writing the currency pair is located at 1.5250.
“With wages rising and the rate of job creation kicking into overdrive, even the most bearish will struggle to find fault with this latest snapshot of the US economy. At 3.1 million jobs created in 2014 - the strongest performance for a decade and half - America's swagger seems well justified,” says Lamb.
FEXCO tell us they are forecasting further gains from here:
"The Dollar has always been a safe haven, but with the US enjoying soaring levels of confidence that are so far at odds with the weakness elsewhere, this polarisation is growing - and the Dollar's bull run could easily turn into a charge."
Dig Deeper
However, Paul Marson, Chief Investment Officer at MONOGRAM Investment, says he is not fully buying into the euphoria:
“On the surface, US employment numbers look strong today. But dig below the surface and it’s obvious this is a job recovery only for the over 55s.
“There has been a total growth of 6% in US employment (or 8.2m new jobs) since the end of the recession in 2009, while jobs for over 55s have grown 22%. This means 72% of new jobs are in the 55+ age group.
“Strip out the over 55s job growth, and employment is up just 2.1% - or 2.3m new jobs. A job recovery for those looking to wind down as they approach retirement is hardly the sign of a robust and healthy economy.”
Pound Falls From 5-Week Highs
The GBP remains at decent levels despite the non-farm selling pressures.
Analyst Joe Manimbo at Western Union tells us:
“The dollar still held a gain on the year against the pound so good terrain to pare back exposure with hedge orders like forwards. But the pound on Friday soared to five-week highs while its more than 1.5% appreciation on the week so far was on pace for its best week in a year.
“The pound found positives this week in a trio of U.K. PMI surveys that hinted at improving early year momentum in the economy.
“How long will sterling buoyancy last? Watch the tone of a Feb. 12 survey from the U.K. central bank on growth and inflation.”
