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GBP Continued Weakness as Unemployment Data Looms

9 November 2015

Since last Thursday’s interest rate decision, GBP has failed to show any strength against any of the major currencies. Falling through short term support levels and looking to test lower levels. Conversely the US Dollar looks in a buoyant mood again since the non-farm payroll figures on Friday.

The non-farm payroll data trumped forecasts with a whopping 271k versus forecast 181k. Unemployment rate stayed unchanged at 5%.

It seems the trend for US Dollar (up) and British Pound (down) may stay in those general directions, with some retraces, until the unemployment figures due out mid this week. Traders will be looking for count rate and percentage that confirm the current trend in these currencies, or a spring back may be on the cards.

Interest rates are still under scrutiny. With Kit Juckes at Societe Generale stating, “With expectations shifting, the Fed may have to deliver a rate hike while the ECB may have to ease in December to drive the dollar higher. More interesting though is how broader risk markets react to rising Fed hike expectations, with implications for the higher-yielding currencies that have done well in Q4 thus far.”

It remains to be seen whether the US will raise rates this year, but it seems most traders are speculating this may now be the case. The strengthening of the dollar could be the catalyst to make the rate change sooner rather than later.

“Overall, the conclusion to take from the jobs data is that the probability of a US rate hike in December has inflated considerably,” commented Lukman Otunuga from FXTM.

Australian Dollar is also falling hard, against the US Dollar. Once again there is unemployment data due out in Oz later this week which could be a turning point for the short term. If weakness continue the support at 0.6900 could be a testing point.

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