The US dollar weakened on Thursday as investors were spooked by a weaker-than-expected ADP employment report.
Meanwhile, the pound is trading in a narrow range so far this morning, with GBP/EUR stable at €1.1858, and GBP/USD flat at $1.3183. GBP/CAD is rangebound at CA$1.7792, while GBP/AUD ticks up to AU$1.9585, and GBP/NZD holds steady at NZ$2.1189.
Looking ahead, the latest US payroll figures as poised to infuse fresh volatility into the US dollar this afternoon.
What’s been happening?
The US dollar was met by notable headwinds yesterday amid growing concerns that the US labour market is cooling.
Stoking these concerns was the publication of the latest ADP employment report, which suggested the number of jobs added by the US private sector last month struck its worst levels since 2021.
While a stronger-than-expected ISM services PMI provided some brief respite for the ‘greenback’ it wasn’t enough to prevent the US dollar from closing the session lower.
Turning to the euro, the latest factory orders from Germany lent the euro some modest support as they reported that growth remained unexpectedly positive in July. While a rebound in Eurozone retail sales over the same period also reflected positively on the single currency.
Despite a lack of UK data, the pound managed to tick higher against the majority of its counterparts on Thursday, buoyed by an improving market mood.
What’s coming up?
Looking ahead, the US dollar could experience notable volatility this afternoon following the latest non-farm payrolls data.
While payrolls are forecast to rise in August, the number of jobs added by the US economy has repeatedly disappointed in recent months.
Should this trend persist, it’s likely to reinforce bets for a bumper 50bps interest rate cut from the Federal Reserve this month and could trigger significant weakness in the US dollar.
In the meantime, the euro faces resistance this morning in response to a much larger-than-expected contraction in German industrial production in July.
Looking at the pound, a lack of domestic data may leave GBP exchange rates to trade without direction through the end of the week.
