GBP/USD Rate Dips as US Employment Data Beat Expectations

Data released from the US Labour Bureau today, showed the US economy created 209k new jobs in July, beating consensus expectations of 183k, expectations which themselves were thought of as 'solid'. 

The Non-Farm Payrolls (NFPs) release is probably the most important economic news event on the calendar and impacts on equity, bond and FX markets. 

The report also showed an upwards revision of the previous June figure from 222k to an improved 231k.  

The Dollar rose after the release, sending the Pound to Dollar exchange rate down to 1.3091 versus the Pound at the time of writing - which was a long way down from yesterday's peak of 1.3280.

Against the Euro, the Dollar traded at 1.1831 after peaking at 1.1911 on Wednesday.

The report showed a steady rising in average earings of 0.3% (2.5% annually), in line with analysts' estimates, and higher than the previous 0.2%. 

The unemployment rate fell to 4.3% from 4.4% previously, whilst the particiaption rate showed a healthy increase to 62.9% from 62.8% previously. 

The result seems to have led to the reaction expected by Investec's Dealing Desk analyst Jonathan Pryor, who said, "A strong number will give the dollar a much needed boost going into the weekend."

The data reinforced expectations that the Fed will continue tightening policy and raising rates in line with current projections.

"All told, the upside surprise on the headline number will be modestly positive for the US dollar and negative for the fixed income, but this is still an important step in the right direction for Fed-watchers that had seen a soft opening to Q3 based on earlier-released survey measures," said CIBC's Royce Mendes. 

According to UBS wage data was the print to watch - which came out at 0.3% in line with higher expectations. 

“The headline number is important, but as the FED is more worried about the sluggish inflation – wage data might be the one to look at. Fair bit of negativity seems to be priced in and hence I believe if the data isn’t a shocker, the USD could have a little relief rally,” said UBS, in their note.

In relation to EUR/USD, however, UBS saw any dips as leading to a 'buying opportunity' as they are still bullish the pair overall, and therefore bouts of USD strength provide ‘buying opportunities’ or dips to buy into.