The pound sterling posted gains on one-month high against the U.S. dollar during the course of Monday’s session, after the U.K. service sector data turned into positive and recoiled to expansionary territory in August, while the dollar continued to wobble.
The currency pair has reached a session high since August 3 during the European trade, and consolidated at 1.3367, rallying by 0.54%.
According to research group Markit, the U.K. services purchasing managers’ index was seen climbing to 52.9 last month from a previous reading of 47.4 in July, citing analysts expected index gain of 50.0.
As the data turned into positive, it has therefore added to the current optimism over the economy’s strength and Britain’s ability to overwhelm the Brexit’s aftermath.
Further, the greenback struggled after Friday’s data showed an added 151,000 U.S. economy jobs in August, missing the expected 180,000 increase.
However, the U.S. unemployment rate steadies at 4.9% this month, puzzling anticipations of a 4.8% downtick.
The average hourly earnings rallied by about 0.1% in August, missing the expected 0.2% increase, the report showed.
Optimism on the near-term rate hike has faded after data showed disappointments, as Fed officials clearly stated that the pace of rate hike will be data-dependent.
Meanwhile, sterling remained higher against the euro, with the EUR/GBP pair declining 0.50% to end the session at 0.8358.
US Labor Data on February 1, 2016
The GBP/USD pair had struggled before the US labor data release last February, fueled by heightened worries over the extended UK low interest rates, which cited that the British growth could be lowered then by -2% if Britain is to leave the European Union.
Apparently, the currency pair eventually gave back their losses, though Sterling had slightly recovered after the Fed minutes.
The chart below illustrates the GBP/USD pair movement during the previous US labor data release, in which the currency showed a steep decline before the scheduled data report and stood from 1.52260 in December last year down to 1.41549 in January this year, also led by Britain’s decision to leave the European Union.
Subsequently, on the day of the US labor data release, the currency pair showed an upbeat, which opened at 1.42454 on the green and tried to break out on the upside at resistance 1.43710. However, it also showed a same level of drop in the next session, which recovered in an instant with an opening trade at 1.44089 and tried to break out at resistance 1.45364.
Given that GBP had started its week at 1.3293, along with the international payments that are in search of the best conversion against the USD since the sterling plunged in August in response to the Bank of England (BOE) decision to cut their base rate to a record low of 0.25%.
We concluded that GBP/USD could continue a bullish trend as UK economic data turned into positive, and has established the aftermath of Brexit.
Meanwhile, the retail sales in the last few weeks also showed a positive result for Business Investment and the recent strong August Manufacturing and Construction PMI.
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