GBP/USD recovers back to 1.3800 level amid quarter-end USD selling
- GBP/USD has recovered back to 1.3800 level on Wednesday amid quarter-end USD selling.
- US data has been in the spotlight; a decent ADP number and blowout Chicago PMI survey failing to aid USD.
- In the UK, the second estimate of GDP data for Q4 2020 was a little better than expected.
USD weakness has allowed GBP/USD to recover back to the 1.3800 level on Wednesday. At present, the pair trades up by around 0.4% or close to 60 pips on the day, though still remains some way off this week’s highs in the 1.3840s.
Driving the day
USD bulls appear to have run out of steam following what has been a very strong month (the DXY is set for its best monthly gains since July 2019 of 2.4%). Surpassing the 93.50 mark appears to have been one key psychological hurdle too much, with traders instead opting to book some profits in lieu of the month and quarter-end.
A solid estimate of the number of jobs added to the US economy in March from ADP and a blowout Chicago PMI survey for the same month were unable to lift USD sentiment. Starting with the former; the payroll firm’s data indicated that 517K jobs were gained on the month, a little below expectations for ADP’s data to show 550K in job gains. Needless to say, however, more than half a million in job gains is pretty impressive. If the official labour market report on Friday confirms half a million in job gains, that would put total non-farm employment at roughly 143.5M, more than 13.5M above last April’s 130Mish lows, but still substantially below pre-pandemic levels of roughly 152.5M in total employment in the country.
Note that while ADP has not been particularly accurate in predicting the official NFP number over the past few months, it has helped to indicate the trend; i.e. ADP accurately predicted the stagnation in the rate at which jobs have been gained in the US into the end of 2020 and start of 2021, and may now be pointing towards the expected pick up in employment over the coming weeks. Wednesday’s ADP data should instil confidence in the market’s consensus prediction for 650K jobs to have been added to the US economy in March.
Turning now to Chicago PMI; the headline index surged to 66.3 from 59.5 in February, well above expectations for a rise to 60.7. The strong data comes in wake of a string of other strong manufacturing surveys for the month of March, be that the regional Fed surveys or last week’s preliminary Markit PMI report and adds further upside risk to the market’s expectations that Thursday’s headline ISM Manufacturing PMI will come in at 61.3. Despite not showing any positive reaction to the above, the dollar did show some minor signs of weakness in wake of a significantly worse than expected February Pending Home Sales release; pending sales tanked 10.6% on the month, much larger than the expected drop of 2.6%.
Meanwhile, and sticking with the theme of data, the second estimate of UK Q4 2020 GDP was better than expected, showing the economy growing at a QoQ pace of 1.3% – pretty good going given the economy spent most of the quarter under relatively severe lockdown restrictions and showing that the economy has become more resilient to lockdown as time has passed since the start of the pandemic (this bodes well for Q1 2021 GDP not being as bad as some fear it might be).
Looking ahead to the rest of the session, US President Joe Biden and US Treasury Secretary Janet Yellen are up after 21:00BST to lay out their economic vision and Biden is expected to unveil the details of his administration’s infrastructure spending plans.
via FXStreet News https://ift.tt/3tYkUTd
March 31, 2021 at 10:55AM