The Pound to US Dollar (GBP/USD) exchange rate softened as the session progressed as data showed that U.S. job openings surged to a 14-year high in February, a sign that the labour market in the world’s largest economy remains on a solid footing despite a sharp slowdown in job growth last month.
Earlier…
The Pound Sterling to US Dollar (GBP/USD) exchange rate gave up earlier gains on Tuesday as the US currency staged a recovery following last week’s weaker-than-forecast US jobs data.
The Pound Sterling to US Dollar (GBP/USD) exchange rate hit a session low of 1.4825
Early in the session the Pound received support from the release of stronger than forecast Service Purchasing Managers Index (PMI) data. The report, which was published by market research group Markit, showed that the UK’s dominant services sector saw activity surge in March to its strongest level since August 2014.
The PMI strengthened to a reading of 58.9 last month, a solid rise from the 56.7 recorded in February. Economists had been forecasting for a figure of 57. The cause of the solid rise was an increase in new business growth and a rise in confidence, which is now at its best level in 10 months.
‘The combination of fuller employment and falling prices should support economic growth by providing an important catalyst to higher consuming spending, on which the upturn appears to have become increasingly dependent,’ said Markit.
Also supporting the Pound was a report released by the business lobby group, the Confederation of British Industry (CBI). The report suggests that the UK economy is likely to have expanded by 0.7% in the first quarter, an improvement over the 0.6% expansion recorded in the final quarter of last year.
US Dollar Exchange Rate Rallies
Despite the positive UK data, the Pound was unable to maintain its earlier gains against the US Dollar.
The ‘Greenback’ staged a solid recovery after it was sent broadly lower last week on the back of data, which showed that the US economy created 126,000 jobs in March, a figure that was well below expectations for a figure of 248,000.
‘I don’t think the US economy is too fragile. First of all, we should not overreact to one miss on the employment report. This is an estimate of the seasonably adjusted change in a magnitude of 140 million. To miss by over 100,000, that does happen from time to time. We weren’t growing at about 300,000 jobs per month, but I don’t think we’re growing at about 100,000 either,’ said David Kelly from JPMorgan Funds.
Some economists are suggesting that the strength of the US Dollar will prove to be a negative for the world’s largest economy as it is putting pressure on the nation’s exporters.
Over the past nine months, the ‘Greenback’ has strengthened by around 25% against a basket of major currencies. According to BlackRock chief executive Larry Fink, the nation’s exporters have so far felt most of the pressure and warned that the wider economy will soon begin to be impacted.
The US Dollar could make further gains later in the session if the latest US Job Openings data comes in positively.
