A barnstorming week for the British pound to US dollar exchange rate, can it continue?
The British pound to US dollar exchange rate opened its account against the US dollar at 1.5198 this week; it subsequently peaked at 1.5684 as great UK data pushed sentiment towards the GBP higher.
Today we see GBP-USD 0.22 pct in the red as traders consolidated positions ahead of the US Non-Farm Payroll report due at 13:30 BST.
Note that the above quote is taken from the wholesale markets, your bank will affix their own discretionary spread. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering you more currency. Please learn more here.
Excellent levels to buy USD
"It’s been a barnstorming week for this pair and these are excellent levels to buy USD," observes Richard Driver at Caxton FX.
Driver goes on to say:
"While, EUR/USD gains have been helpful for this pair, sterling is definitely seeing some broad-based demand across the board, as well it should given the upturn in Q2 growth figures."
The US non-farm payroll figure is the highlight of the monthly calendar and trading around it is a risky game.
"A stronger than expected showing will see the USD rally and rally hard, so we’d highlight that at $1.56, these are strong levels at which to sell sterling," says Driver.
US Non-Farm Payrolls the death knell for USD?
What will the reaction of the US dollar be following the release of today's all important data?
Boris Schlossberg at BK Asset Management says that sentiment has turned so negative towards the dollar over the past several days that much of downside in NFPs may already be discounted.
"If the payroll number prints anywhere above the 110K level the reaction in the market may be one of relief rather than disappointment as fears dissipate," says the analyst.
According to Schlossberg today's report could prove to be one of the more significant economic data points in recent history:
"There is no doubt that US economic activity has slowed over the past several months, but further dollar weakness will only occur if today's data suggests something more sinister - that the US economy may be starting to contract again.
"The prospect of such an outcome appears to be unlikely given the relatively steady rate of jobless claims which show that the labor markets continue to see a modicum of demand.
"The dollar may therefore stabilize and perhaps even rebound if the NFPs today prove relatively benign. However, if the number prints significantly below the 100K level the greenback could see massive downside risk with USD/JPY possibly dropping through the 94.00 level while EUR/USD will likely push through the 1.3300 resistance and cable through 1.5700 mark.
"With sentiment already skewed against the greenback, seriously bad news could trigger massive momentum moves which will likely be exacerbated by further tripping of stops."