Pound Dollar Rate Starts New Week Lower Following US Employment Blowout

The most important economic release on the US data calendar comfortably beat expectations leading currency traders to buy the dollar in response.

A frenzy of US dollar buying has forced the pound to dollar exchange rate conversion (GBPUSD) significantly lower in the final session of the week. The GBP-USD was already struggling owing to a string of under-par domestic releases.

The GBP-USD rate was pushed lower by over a percent in the wake of the release – the pair was seen at 1.5223, down from an earlier high in the day of 1.5370.

The euro also suffered with a strong run coming to an abrupt end.

Nonfarm Payrolls (May) read at 280K, analysts had forecast a reading of 225K showing a massive beat on expectations.

David Lamb, head of dealing at the forex specialists FEXCO, comments:

"After spending much of the week in the doldrums, the dollar has been re-energised by this unexpectedly strong jobs number.

"With the US economy once again generating jobs at a prodigious rate, the markets are increasingly betting that the more modest jobs figures seen at the start of the year were a temporary lull.

“With this clear sign that the economy remains firmly on the boil, the odds have shortened dramatically on the Fed raising US interest rates sooner rather than later.

"This month's monetary policy meeting could confirm that rates will be lifted off their current floor as early as September.

"That prospect, coupled with the robust performance being shown in most sectors of the economy and the seemingly irrepressible confidence of American consumers, is now making the greenback very attractive to international investors.

"With money flowing into dollars, the US currency is back in full bull mode."

However, Dennis de Jong, managing director at UFX.com reckons there is a chance markets are over-reacting to the news:

“Fed Chair Janet Yellen won’t be getting too carried away with the better than expect nonfarm payroll data released today as the disappointment from the latest GDP numbers that showed the world’s largest economy contracted still lingers.

“The situation in Greece will significantly impact on world markets and the proposed US interest rate hike will need to wait for a solid run of positive domestic data before Yellen can confidently take action. Today’s nonfarm payroll figures are just one step on what could turn out to be a longer than expected road toward higher rates.”