Sterling rose against the dollar on Friday after a much weaker-than-expected September US jobs report checked the greenback's advance. GBP/USD gained 0.17% to $1.3224, while the euro also firmed. ING still sees the dollar holding most of its recent gains over the near term.
GBP/USD rose 0.17% to $1.3224, and EUR/USD gained 0.13% to $1.1258, as of 09:07 ET. The dollar index had broken to a new high for the year above 101.80 on Thursday. ING's global head of markets, Chris Turner, said the dollar can largely hold its gains, or extend a little higher, with the index heading toward the 102.85 area.
September Payrolls Miss Forecasts by a Wide Margin
The US economy added 29,000 jobs in September, well below forecasts of 85,000-90,000. August was revised down to 133,000 from 162,000, and July was cut to a loss of 10,000 from a gain of 21,000, leaving combined July-August employment 60,000 lower than previously reported.
Pricing for an October Fed rate hike had already fallen to 28% from 70% a week earlier, after Fed Vice Chair Philip Jefferson echoed John Williams in saying the Fed should not rush into back-to-back hikes. Both comments leaned dovish, and markets are now settling on a December rate hike instead, with September inflation data due on Oct. 14.
Sterling's Move Is Dollar-Driven, Not UK-Driven
Sterling's gain is not rooted in UK fundamentals. The pound had fallen on Thursday as a global bond sell-off pushed UK long-dated yields to multi-decade highs, and Friday's bounce instead tracks the broader pullback in the dollar.
The euro sits on weaker footing in the same trade. EUR/USD broke to new lows for the year on Thursday as the sell-off in French debt intensified. According to ING's Chris Turner: "We would expect upside corrections to be relatively shallow now." He said the sell-off had dramatically questioned whether the ECB could deliver another 75 basis points of tightening, and ING strategist Francesco Pesole has argued the euro could add another 2% of risk premium if the sell-off extends. ING sees EUR/USD biased toward 1.1100/1120, possibly closer to 1.10, over the near term.
ING's view would shift if French and peripheral bond markets stabilize and the ECB pushes ahead with tightening, or if US-Iran negotiations produce a breakthrough, which Turner flagged Thursday as the main risk to a bid dollar in October.
Source: Investing.com
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