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The dollar is at risk of further losses if it can't even rally on good jobs data.
Analysts say the dollar's failure to launch after strong U.S. labour market statistics speaks of an overarching negativity to the currency that will be difficult to shake.
It was reported Wednesday that U.S. non-farm payrolls rose 130K in January, a comfortable beat of expectations for 65K. This is intuitively good news for the dollar and it did rise as an initial response to the release.
However, at the time of writing Thursday, the pound to dollar exchange rate is firm at 1.3641, effectively where it was this time yesterday, ensuring the pair still holds onto a weekly gain, despite negative UK political developments.
The USD's inability to rally shows that "there are lots of avenues for weakness if that’s what the market wants to see," says Sarah Ying, Strategist at CIBC Capital Markets.
It's this overarching bearish USD thesis that still looks to be in control of GBP/USD and other USD pairs. "A set of robust US jobs numbers yesterday prompted a hawkish Fed repricing, but failed to give a significant boost to the dollar," says Francesco Pesole, FX Strategist at ING Bank.
"This is - in our view - a signal of lingering strategic bearishness on the greenback, which can only be fought with more good data," he adds.
"The dollar's gains proved fleeting. By the close, the greenback had fallen against a basket of major peers, suggesting investors were not comfortable abandoning the "sell America" - or perhaps more accurately, "hedge America" - trade just yet," says Karl Schamotta, Chief Market Strategist at Corpay.
ING says a string of consensus-beating data prints is required to convince the market to shift its stance on the dollar.
Friday's CPI inflation print will be instructive in this regard, as even an on-target release would likely be enough to see the dollar selloff.
Above: GBP/USD is supported at the 21-day moving average.
