After a slump since mid-July, the dollar secured a correction from 26-month lows on Friday which pushed Sterling/dollar (GBP/USD) to lows near 1.3000 before recovery with Sterling/Euro (GBP/EUR) little changed near 1.1080. The currency market focus will switch to the UK labor market with the latest jobs data due at Tuesday’s market open.
US jobs data helps trigger dollar recovery
Friday’s US employment report was a significant trigger for a dollar correction. US July non-farm payrolls increased 1.76mn following a revised 4.79mn increase previously and slightly above consensus forecasts of 1.60mn. Unemployment declined to 10.2% from 11.1% and below expectations of 10.5%.
The data helped trigger a covering of short dollar positions despite deadlock in US negotiations on another fiscal support package. GBP/USD declined to lows just above 1.3000 before paring losses.
Negotiators failed to secure agreement on Friday with President Trump issuing executive orders to provide temporary support measures. A calm response in equity markets helped protect risk appetite.
UK trade developments remain on the radar
Trade developments will be watched closely as the UK and Japan edged closer to a deal.
On Friday, UK trade secretary Truss commented, “We have reached consensus on the major elements of a deal, including ambitious provisions in areas like digital, data and financial services that go significantly beyond the EU-Japan deal.”
Any deal with Japan would provide a boost to EU/UK talks, although market sentiment remained cautious.
GBP/CHF SHORT (Sell)
ENTER AT: 1.1964