GBP/USD Weakens Near 1.3500 Amid Cautious Trading, Data Uncertainty

The GBP/USD pair opens the new week with a weaker tone and drops to the 1.3500[1] psychological level in the Asian session. It is believed that the movement does not demonstrate a significant degree of selling pressure, which indicates that bearish traders[2] should be cautious. It could be nothing but a break following the retreat that Friday saw after the push up to close to 1.3555, the highest point in almost three weeks.

Market commentators note that the US Dollar[3] has recovered some basis after dropping to its lowest point since July 28, thereafter, after dismal US employment statistics last Friday. The appreciation of the Dollar has been greatly attributed to the fact that the Japanese Yen has nosedived following political unrest[4] in Japan. It is believed that the gains could be short-lived since rising expectations of Federal Reserve[5] interest rate cuts would keep restricting the Dollar upside.

Global reports point out that the US Nonfarm Payrolls indicated that the new jobs in August were just 22,000[6], which is much lower as compared to expectation. The changes[7] revealed that June in fact lost 13,000 jobs, the first decline since December 2020, which is indicative of a weakening labour market. Some reports[8] indicate that this sluggishness has increased speculation that the Federal Reserve might decide to cut the rate further to help stimulate growth. Consequently, the pressure on the US dollar is experienced and it might be capped soon.

The traders based on the FedWatch Tool[9] bred by the CME Group are sure that the Federal Reserve will reduce the rates at least by 25 basis points in September and possibly by three times in the current year. This expectation is reckoned to be keeping US Treasury yield at bay. In addition to the improved risk mood, it will tend to limit any meaningful surge in the safe-haven US dollar, which will serve to restrict any downside pressure on the [10] GBP/USD exchange rate. The Pound is expected to struggle to get concrete support as fiscal uncertainty continues to rise before the Autumn Budget[11] in November. This issue overrides that of the Bank of England (BoE)[12] being cautious with reducing the rates as there is still pressure on inflation. Consequently, the profitability of the GBP/USD[13] pair is expected to be constrained, and traders may hesitate to assume aggressive positions at a time when economic data releases do not provide any tangible momentum in the short-term.

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USD/CAD Gains Sixth Day as Dollar Weakness Limits Further Strengthening

The USD/CAD pair led its sixth-day gains and traded around 1.3840[14] in Monday's Asian session. Despite this, more strength is believed to be restricted since the US Dollar[15] is under pressure. Market reports[16] note that weaker-than-anticipated US employment data in August has stimulated speculation that the Federal Reserve may start reducing interest rates earlier than expected. The change in mood[17] is thought to have the potential of driving the greenback to greater heights which could end up limiting the recent bullish movement of the currency pair in the short term.

The US Nonfarm Payrolls[18] increased only 22,000 in August, significantly lower than the estimates of 75,000, as affirmed by Bureau of Labour Statistics. This comes after a revised gain in 79,000 jobs in July. Simultaneously, the unemployment rate rose to 4.3% (up to 4.2%)[19], which is expected. Market commentators[20] point out that the smaller numbers underscore the deceleration of the pace of hiring in the whole economy and contribute to the worries about the well-being of the labour market as policymakers balance the prospects of US growth and interest rates.

Traders now perceive a 92% possibility that the Fed[21] may cut rates by 25 basis points at its September meeting, up from 86% last week, according to some analysts. The CME FedWatch tool[22] indicates that market sentiment on monetary policy is shifting, with expectations for a greater 50 basis point cut also rising.

The USD/CAD pair supported itself as the Canadian Dollar dropped after the release of poor jobs statistics and investors speculate that the Bank of Canada (BoC)[23] will probably cut the policy further. Market reports[24] indicate that Canada unexpectedly lost approximately 65.5K jobs in August as compared to the projected 7.5K increase, a second month of declines in the market after 40.8K in July. Meanwhile, the unemployment rate[25] rose to 7.1, which is higher than the expected 7.0, and higher than the earlier 6.9, and that is provoking increased worries about the outlook of the labour market in Canada.

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EUR/GBP Stable Amid France’s Political Crisis, Eurozone Growth Steady

EUR/GBP remained stable and traded within the range of 0.8680[26] during Monday Asian trading. It is believed that the pair is holding solid since the Euro is gaining ground, but sentiment is cautious because of political tensions[27] in France. Prime Minister Francois Bayrou[28] is expected to practically lose a major confidence vote plunging his government into near collapse. Market reports[29] point out that the threat of a new political stalemate is bound to load France, the second-largest economy in the Eurozone, and it poses broader implications to the rest of Europe as it copes with the challenges of the war in Ukraine and Russia.

On Sunday, US President Donald Trump[30] stated that the European leaders would come to the United States on Monday or Tuesday to discuss how they could end the Russia-Ukraine war. After a heavy Russian air attack last night, he acknowledged that he was not pleased at the way the war was going. Meanwhile, the euro had strengthened before Thursday, the European Central Bank (ECB)[31] meeting. Market reports[32] point out that markets are highly anticipating that the ECB may keep interest rates steady in a second round, given consistent economic growth and inflation risking target levels to give ground to maintain policy unaltered.

Some analysts point out that the Eurozone GDP[33] rose by 0.1% quarter to quarter and that was in line with the predictions and no change with the last forecast. Annually[34], the growth improved to 1.5% as compared to 1.4%. In the meantime, the inflation rate in terms of the Harmonised Index of Consumer Prices[35] increased to 2.1% in August, slightly higher than 2% in July. These figures[36] are thought to indicate sluggish but consistent economic growth as well as slight increase in consumer prices within the Eurozone economy.

Market analysts[37] note that the Retail Sales of the UK increased by more than expected in July, which improved their expectations on the sterling. Sales increased 0.6% every month, versus the 0.2% projected, and increased 1.1% year-over-year, a bit below the projection of 1.3% but better than June, which was 0.9%. It is believed that the increase in the level of consumer demand may influence inflation as the Bank of England (BoE)[38] has a reason to keep its hand tight which could assist the Pound to achieve even more success in the markets.

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NZD/USD Climbs on Weak US Dollar, Strong China Trade Figures

The global market notices the New Zealand Dollar (NZD)[39] started the week at a higher level mainly when the US Dollar was weaker as investors are looking forward to a potential Federal Reserve rate cut next week. To this effect, positive trade balance figures[40] in China, the largest trading partner of New Zealand have enhanced confidence. The combination of anticipation of easier US policy[41] and favourable Chinese numbers is believed to have given the Kiwi currency early back-up in Monday's trading session.

The NZD/USD pair rose to new gains in the second consecutive day and traded above 0.5920[42] in Monday's trading session. This level[43] is thought to be its strongest level since 19 August. Investors[44] observe that the sudden upward movement on Friday below 0.5840 has brought about the enthusiasm of a prolonged reversal. Market commentators[45] point out that as the recovery gains momentum, the new recovery might go even further as the buying interest keeps the two afloat, indicating that the pair might go further higher in the forthcoming sessions.

The latest US Nonfarm Payrolls report[46] indicated a sluggish job growth than expected and this is an indicator that the labour market is decelerating. This is even believed to have consolidated the anticipation that the Federal Reserve[47] may lower interest rates next week. Investors are once again contemplating the possibility of greater reduction of 50 basis points. Market reports[48] point out that the news has also rejuvenated pressure on the US Dollar with traders making changes in anticipation of the next policy announcement by the Fed.

Market reports noted that the US net employment creation[49] was produced at a sluggish pace in August, with only 22,000 new jobs as compared to 79,000 in July. The figures of June were revised to show that 13,000 jobs were lost, the first people lost since the pandemic in 2020. In the meantime, the unemployment rate[50] increased to 4.3% against 4.2%, which led to the demand to ease monetary policy by the Federal Reserve. Conversely, the New Zealand Dollar (NZD)[51] strengthened following the announcement of a bigger than expected trade surplus of USD 102.33 billion, bigger than the estimated USD 99.2 billion.

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