GBP/USD Falls Lower in the Face of Un-Stoppable Confidence in US Economic Prowess

Pound, Dollar Rate Today: The pound to dollar exchange rate currency pair remains under pressure on global FX markets as there appears to be little reason to do anything else other than buy more dollars in the mind of the investor.

The U.S. dollar retains its strength despite the miss in the October US Non-Farm Payrolls data. The figure read at 213K, below expectations for 233K.

However, the USD bulls will not be daunted:

“The slightly disappointing nonfarm payrolls report won’t cause Janet Yellen and her Fed colleagues too much of a headache just yet. September’s figures were excellent and although October has come in below expectations, the US economy remains fairly robust as it approaches the all-important holiday season."

The impact on the pound to dollar is seen below:

Be Aware: The above quotes are from the inter-bank spot market. Your bank will widen the spread on the above numbers when passing on their retail rate to customers. An independent FX provider will however guarantee to undercut the bank's offer thus delivering you more forex. Please see more on this here.

Dollar Rallies on Good Data, Political Forces

Politics are also keeping the dollar bulls fat. A Republican majority Congress during a Democratic presidency, was last seen in 2006, and is generally seen as a pro-business, pro-economic growth political backdrop.

"The mid-term election results were enough to give the dollar an across-the board boost. This morning, ADP reported that private sector companies added 230,000 new jobs in October, better than the 220,000 forecast and yet another month of 200K+ jobs growth," says Omer Esiner at Commonwealth Foreign Exchange.

The positive outcome, one of the best readings in more than a decade, spoke better about the job market’s prospects on the eve of the government’s critical nonfarm payrolls report, forecast to rise 231,000 for October from 248,000 in September.

"Another healthy hiring report Friday would validate the Fed’s ending of QE last month and seemingly bring the bank a step closer to a rate hike, a dollar friendly scenario," says Manimbo.

Pound Sterling Sinks on Softer Services PMI, Lack of BoE Action

"No support for sterling today from the BOE’s steady hand on policy. The pound continued to hover around $1.59 against the greenback, its weakest in nearly a year, with underlying sentiment suffering from waning expectations for a central bank rate hike any time soon," says Joe Manimbo at Western Union.

The British pound (GBP) fell to a one-year low against the dollar after data mid-week showed the U.K.’s dominant services sector slowed much more than expected last month.

"The drop in the services PMI from 58.7 to 56.2 dented the idea that the U.K. remains one of the few bright spots in Europe and suggested that the Bank of England may have time to wait before raising interest rates off of record low levels," says Esiner.

Despite the fall it is worth noting that all three of the UK PMI readings are well ahead of the readings of the Eurozone and there is the danger that the UK's outperformance is underestimated.

Don't Get Carried Away by the Republican-Inspired USD Rally

If you are expecting the dollar to run away higher against the pound sterling on the basis of the election results, caution is urged.

Bank of Tokyo-Mitsubishi tell us there is no historical precedent to back USD gains on this basis:

"As was widely expected, the Republican party in the US took back control of the Senate for the first time under the presidency of Barack Obama consigning the final two years of his term in the White House from lame duck to very lame duck.

"That suggests continued policy gridlock in Washington. For that reason (continued gridlock as before), there is likely to be limited reaction in the financial markets.

"The equity market tends to perform well in the three and six month periods following these elections and with the perceived more-market-friendly Republicans in control of Congress that might be the case again now.

"For the dollar there is no historical pattern post mid-term elections and there is no implications here either."

Technical Outlook for the GBP/USD

Putting aside the noise created by the various data and political events, what does the outlook for the pound to dollar exchange rate look like?

Analyst Luc Luyet at Swissquote Research gives us an idea:

"GBP/USD remains weak after the bearish breakout at 1.5995. Indeed, the hourly resistance at 1.6038 (30/10/2014 high) needs to be broken to improve the short-term technical structure. Monitor the hourly support at 1.5927 (03/11/2014 low).

"Another support stands at 1.5877.

"In the longer term, given the significant deterioration of the technical structure since July, the strong resistance area between 1.6525 (19/09/2014 high) and 1.6644 (01/09/2014 high) is expected to cap any upside in the coming months.

"Monitor the current consolidation phase near the strong support at 1.5855 (12/11/2013 low)."