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Sterling Gains Slightly as Markets Brace for US Non-Farm Payrolls Report
Summary
The British pound saw a modest increase against the U.S. dollar, which held firm near its yearly highs as currency traders awaited influential September employment data from the United States.
The British pound edged higher against the U.S. dollar on Friday, though the greenback remained near its strongest levels of the year as investors focused on the upcoming U.S. non-farm payrolls report for September.
As of 05:48 ET (09:48 GMT), the GBP/USD currency pair rose 0.05% to trade at $1.3207, according to data from Investing.com.
Spotlight on US Jobs Data
Market participants are closely watching the September U.S. employment figures, a key indicator for Federal Reserve policy. Economists expect the report to show a gain of between 85,000 and 90,000 jobs, with the unemployment rate at 4.1% and average earnings up 3.1% year-over-year.
Despite the potential for a slowdown from the prior month's reading of 162,000, analysts at ING suggest the dollar may prove resilient. "Given very low growth in the US labour force, we doubt a downside disappointment in the headline number will weigh heavily on US rates or the dollar," said Chris Turner, global head of markets at ING.
Dollar Strength and Fed Outlook
AdThe dollar index, which measures the greenback against a basket of major currencies, broke to a new high for the year above 101.80 on Thursday. ING analysts noted that resilient U.S. economic activity and high energy prices could allow the dollar to hold or extend its gains.
This strength persists even as market expectations for an imminent Fed rate hike have softened. Citing dovish-leaning comments from Fed officials, the source material indicates that market pricing for an October rate hike has fallen to 28%, down from 70% a week ago. Traders are now largely settling on a potential hike in December.
European Currency Pressures
Sterling's minor advance was not seen as being driven by UK-specific fundamentals. The currency fell on Thursday after a global bond market sell-off pushed UK long-dated government bond yields to multi-decade highs.
Meanwhile, the euro also firmed slightly to $1.1250 but remains under pressure. According to ING, an intensified sell-off in French government debt has weighed on the single currency, raising questions about the European Central Bank's capacity to deliver another 75 basis points of monetary tightening.
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