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GBP/USD within spitting distance of March 2020 low in risk-off trade

currency-newsGBP/USD within spitting distance of March 2020 low in risk-off trade
The US dollar continued to rally on Thursday, with the safe-haven currency being underpinned by a cautious market mood and upbeat US data.

Meanwhile trade in the pound is mixed so far this morning, with GBP/EUR slipping to €1.1579 and GBP/USD stable at $1.1549. GBP/CAD and GBP/AUD are holding steady at C$1.5188 and AU$1.7004, respectively, while GBP/NZD climbs to NZ$1.9040.

In the spotlight today we have the latest US payroll release. Could a sharper-than-expected fall in US employment growth knock the wind out of the US dollar?

What’s been happening?

The US dollar extended its bullish run yesterday as a prevailing risk-off mood saw investors continue to favour the safe-haven currency.

Reinforcing the US dollar’s gains was the publication of the latest ISM manufacturing PMI.

August’s release reported the US factory sector continued to expand at the same pace as it did in July. Beating forecasts for a modest decline in activity and ending a three-month consecutive decline in growth.

The continued upside in the US dollar pushed the euro lower on Thursday as a result of the negative correlation between the pairing. The single currency was also dented by a downward revision to the Eurozone’s manufacturing PMI in August.

Meanwhile, the pound remained on the back foot yesterday amid growing concern over the UK’s cost of living crisis.

The continued slump in Sterling also appeared to be linked to concerns over a likely Liz Truss led government, amid uncertainty over her economic policies and the future independence of the Bank of England (BoE).

What’s coming up?

Centre stage today will be the publication of the latest US non farm payrolls.

Consensus forecasts predict the US economy will have added a respectable 300,000 jobs last month, after a massive 528,000 jobs were added in July.

However, following a shockingly low ADP employment report earlier in the week, there is a risk August’s payrolls could underperform and trigger a USD selloff.

For EUR investors the publication of Germany’s latest trade figures could drag on the euro this morning after they reported a sizable contraction in exports.

Meanwhile, the pound could struggle to attract support today as the absence of any notable domestic data leaves GBP investors to ruminate on the UK’s bleak economic outlook.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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