Pound-Dollar could extend its rally if Friday’s US payrolls disappoint, while improving risk sentiment continues to weigh on the safe-haven US Dollar.
The Pound to US Dollar (GBP/USD) exchange rate strengthened on Wednesday as softer US economic data and improving market sentiment reduced demand for the US Dollar.
At the time of writing, GBP/USD was trading around $1.3479, up approximately 0.2% on the day.
DAILY RECAP:
The US Dollar (USD) weakened as improving market sentiment reduced demand for the safe-haven currency.
Investor confidence improved amid growing optimism that the US, Iran and Oman were moving closer to an agreement to reopen the Strait of Hormuz, with reports suggesting a deal could be announced within days.
The Greenback also came under additional pressure following another disappointing batch of US economic data.
The latest ADP employment report showed private-sector payrolls increased by just 44,000 in July, reinforcing expectations that Friday’s non-farm payrolls report could also disappoint.
This was followed by a weaker-than-expected ISM services PMI, which suggested activity across the US services sector is beginning to lose momentum after a prolonged period of resilience.
Meanwhile, the Pound (GBP) edged higher after revised business survey data pointed to stronger-than-expected activity across the UK economy.
S&P Global’s final services PMI for July was revised above the preliminary estimate, confirming a solid rebound in Britain’s dominant services sector after June’s slowdown.
The stronger survey encouraged investors to believe a more resilient private sector could give the Bank of England greater flexibility to tighten monetary policy later this year if required.
Near-Term GBP/USD Forecast: Looming US Payrolls Report to Drive the Next Move?
Looking ahead, trading in the Pound to US Dollar exchange rate may become increasingly subdued as investors await Friday’s US non-farm payrolls report.
The employment figures are expected to play a crucial role in shaping Federal Reserve interest rate expectations.
Another weak labour market report could further reduce expectations for a September rate hike and place additional pressure on the US Dollar.
Meanwhile, with little UK economic data scheduled before the weekend, Sterling is likely to take its lead from broader market sentiment, with an improving risk backdrop potentially offering further support.
Our currency coverage draws on live market data, official economic releases and published bank research.
