The Pound Sterling to US Dollar (GBP/USD) exchange rate held onto a modest uptrend in spite of a better-than-expected improvement in the US unemployment rate.
Even as the unemployment rate fell from 7.9% to 6.9% in October, driven by a solid uptick in non-farm payrolls, the mood towards the US Dollar (USD) proved muted.
Although signs point towards a recovery in the US labour market focus remained on the unfolding US presidential election.
With the Senate looking set for an even split the prospect of further delays to the long-awaited injection of fresh fiscal stimulus weighed heavily on market sentiment.
As the vote counting process continued to drag on, with the Trump camp still attempting to challenge various results, the election appears on course to hang over the economy for some days to come.
Pound Volatility Forecast on Latest UK Labour Market Data
Demand for Pound Sterling (GBP) could see an improvement on Tuesday, though, if the latest set of UK labour market data can impress.
With forecasts suggesting a sloid uptick in average earnings at the end of the third quarter worries over the economic outlook could take a temporary backseat.
Higher levels of wage growth would bode well for the UK economy, given the significant role that consumer spending plays in shoring up the fragile service sector.
On the other hand, the mood of GBP exchange rates may sour in response to September’s unemployment rate if it picks up as anticipated.
An increase from 4.5% to 4.8% would suggest that the labour market continued to move in a negative direction last month, adding to existing worries over rising joblessness within the UK.
While the government has since opted to extend its furlough scheme until March the lingering prospect of an impending wave of winter job losses could still weigh on demand for the Pound.
Election Fallout Set to Dominate USD Exchange Rate Direction
Sentiment towards the US Dollar looks set to remain dominated by the fallout of the US election for the foreseeable future.
Uncertainty over the ultimate result could potentially keep the US in a state of political gridlock until 2021, leaving the economy exposed to increasing pressure.
As long as fiscal stimulus support remains a distant prospect worries over the underlying health of the US economy could easily drag on USD exchange rates.
Tuesday’s NFIB business optimism index may also put a dampener on the US Dollar, with forecasts pointing towards a deterioration on the month.
Evidence that businesses are taking a less optimistic view of the economic outlook could offer a solid boost to the GBP/USD exchange rate.
Unless markets see signs of greater economic resilience the mood towards the US Dollar could prove bearish in the coming week.
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