Dollar Rate Today: USD Hit by NFP Disappointing - Gains vs Pound Sterling and Euro Pared Back

Could this disappointing data release see the USD rally come to an end - or at least pause in September?

Before we attempt to answer the question below are the USD rates at the weekend:

• The British pound to US dollar exchange rate (GBP/USD) is at 1.6327.
• The euro to US dollar exchange rate (EUR/USD) is 0.14 pct higher at 1.2953.
• The US dollar to Canadian dollar exchange rate (USD/CAD) is at 1.0882.

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"In what’s been a difficult few weeks for President Obama, today’s disappointing non-farm payroll figures have piled further pressure on the White House’s economic strategy. The data is extremely volatile on a month-by-month basis and the Fed needs to see a significant rise before pushing ahead with an interest rate rise," says Dennis de Jong, managing director at UFX.com.

US Non-Farm Payrolls Below Par

Sentiment to the US dollar will likely cool after the release of nonfarm payroll data that saw a rise of 142k in August, well below consensus forecasts for 230k.

There was a net downward revision of 28k to the three previous months.

"The July and August payroll data reveal a distinct slowing in the pace of employment growth relative to the Q2 average and, in our view, present a reality check against other incoming data such as the ISM indices, durable goods, and construction that pointed to solid economic momentum in Q3," says Michael Gapen at Barclays.

Should the USD bulls be worried? Not necessarily says Gapen:

"We do not find this report worrisome given our expectation that the economy would slow from the 4.2% rebound in real GDP growth in Q2 to 2.5% real growth in 2H 2014.

"Given demographic trends and a slower-growing labour force, we estimate that the economy needs to generate only 75-100k jobs per month to keep the unemployment rate steady.

"Therefore, although the 142k is soft relative to our and consensus forecasts, it is still enough payroll growth to keep the unemployment rate on a downward trend. This report will likely reduce the probability that the Fed takes an abrupt change in tone in September to a more hawkish policy stance, and we continue to see longer-term economic trends as consistent with a June 2015 rate hike."

Outlook for the USD - Strong Gains Against the Euro

With regards to the euro dollar exchange rate, the outlook remains anchored firmly in favour of the US dollar.

RBS analyst Gregg Gibbs tells us:

"Cash rates in the Eurozone are expected by the market to be significantly negative for the foreseeable future. This is a brave new world for central banking and I think it can see a very big and sustained fall in the EUR exchange rate. How far it goes will depend on a variety of factors but my first thought is the EUR/USD may move to 1.15 and should at least fall below 1.25."

British pound to US dollar exchange rate forecast

"GBP/USD continues its relentless decline, as can be seen by the break of the key support at 1.6460. Prices are now close to the key support area between 1.6284 (38.2% retracement) and 1.6220. Hourly resistances for a short-term bounce can be found at 1.6441 (intraday high) and 1.6497 (03/09/2014 high).

"In the longer term, prices have collapsed after having reached 4-year highs. Monitor the strong support at 1.6220 (17/12/2013 low) given the general oversold conditions and the lack of previous significant bearish reversal pattern. A key resistance now stands at 1.6739. Another strong support lies at 1.5855 (12/11/2013 low)."